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Papua New Guinea

Political sketch

Formerly Papua and New Guinea; Papua was also called British New Guinea and New Guinea was also called Kaiser Wilhelm Land. Independent from Australia on 16 September 1975.

The island of New Guinea seems to have been settled about 50,000 years ago. Its mountainous geography favored its division into many tribal groups, many speaking quite different languages, isolated from each other and the rest of the world. The Portuguese sighted New Guinea in 1512 but made no landing until 1527. Inigo Ortiz de Retes claimed the island for Spain in 1545, but no attempt at colonization occurred until 1793 by a British naval officer in what is now Irian Jaya, Indonesia. The Dutch, claimed the western half of the island as part of the Dutch East Indies in 1828. The British sea captain John Moresby surveyed the southern coast of the eastern half in the 1870s and on 6 November 1884 he proclaimed a British protectorate over the southeastern part of the island. In the same year, the German Neu Guinea Compagnie took over the northeastern part of the island.

On 1 September 1906, the United Kingdom transferred to Australia the British portion of New Guinea, and its name was changed to the Territory of Papua. After the First World War began in Europe, Australian forces occupied German New Guinea; the small German force surrendered on 17 September 1914. On 17 December 1920, the League of Nations gave Australia a mandate to govern German New Guinea, except for Nauru (made a separate mandate of Australia) and Micronesia (made a mandate of Japan). Australian military occupation gave way to Australian civilian administration on 9 May 1921. On 23 January 1942, during the Second World War, Japanese forces invaded the islands of New Britain and New Ireland. They invaded New Guinea on 8 March 1942, conquering it and part of Papua, but they failed to take the whole island. Australian and other Allied forces retook all of Papua and New Guinea by May 1945. On 30 October 1945 Australian combined Papua and New Guinea into the Territory of Papua and New Guinea, which became a United Nations trusteeship territory on 31 December 1946. In September 1969 Indonesia absorbed the western part of New Guinea, formerly under Dutch rule, as the province of Irian Jaya. A low-level guerilla movement in Irian Jaya favors secession from Indonesia and possible union with Papua New Guinea.

In December 1973 Papua New Guinea, as it was now called, became self-governing, and on 16 September 1975 Papua New Guinea became independent from Australia. In 1989 secessionist rebels on Bougainville Island closed the island's copper mine, a major source of revenue for the country. The economy is based to a large extent on the export of mineral and agricultural products. The government is democratic.

Wars since 1500

First World War in the Pacific, 1914 (United Kingdom, British Empire, France, United States, Japan, and their allies against Germany and its allies ); Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies). (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies); Papua New Guinean Civil War of 1988-1998.

Convertibility

German colonies in the Pacific:

The First World War began in Europe on 1 August 1914. By November 1914, all German colonies in the Pacific had been captured by opposing forces. In the meantime, communications with Germany, including financial transactions, were blocked.

The sterling area:

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.

Territories occupied by Japan during the Second World War:

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Australia and territories using its currency:

Australia imposed an embargo on shipments of gold from 14 July 1915, after the First World War had begun, through 24 April 1925 (Australia, proclamation of 14 July 1915). Australia imposed exchange controls on 28 August 1939, shortly before the Second World War began. In January 1976 Australians became free to buy and sell gold in Australia; previously, they had been required to sell it to the central bank within one month. Australia removed most exchange controls on 12 December 1983, in conjunction with a managed float of the Australian dollar (Australia, Treasurer's announcement of 9 December 1983). On 1 July 1990 Australia abolished regulations pertaining to the export of Australian notes and coins.

Australia left the sterling area on 23 June 1972.

Papua New Guinea alone:

From 1 January 1976, transactions between Papua New Guinea and Australia became subject to exchange controls as Papua New Guinea left the Australian currency area. Papua and New Guinea had belonged to the area since the First World War. On 1 June 2005 all current account transactions and many capital account transactions became exempt from authorizations for excahgne controls (IMF ARER 2005: 743).

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): There may have been banking problems in 1985.

Frankel and Rose (1996) list of currency crashes: None.

No exchange rate data in Reinhart and Rogoff (2003).

References

Primary sources:

--Laws and decrees:

Australia. Gazette. 1901-present. Commonwealth of Australia Gazette (1901-1973; also titled Commonwealth Gazette); Australian Government Gazette (1973-1977); Commonwealth of Australia Gazette (1977-present). Canberra: Commonwealth Government Printer (1901-1979); Australian Government Publishing Service (1979-present).

German New Guinea. Gazette. 1909-1919. Amtsblatt für das Schutzgebiet Deutsch-Neuguinea (1909-1914); British Adminsitration German New Guinea Government Gazette (1914-1919). Rabaul: Kaiserlichen Gouvernement in Rabaul (1908-1914); Government Printer (1914-1919). (Successor to Neu Guinea Compagnie gazette; succeded by Papua New Guinea gazette.)

Germany. Overseas gazette. 1890-1921. Deutsches Kolonialblatt. Issued by Kolonial-Abtheilung des Auswärtigen Amts (1890-1907); Reichs-Kolonialamt (1907-1919); Reichskolonialministerium (1919-1920); Kolonialzentralverwaltung, Reichsministerium für Wiederaufbau (1920-1921). Berlin: Ernst Siegfried Mittler und Sohn.

Germany. 1892-1910. Die deutsche Kolonialgesetzgebung. Sammlung der auf die deutschen Schutzgebiete bezüüglichen Gesetze, Verordnungen, Erlasse, und internationale Vereinbarungen mit Anmerkungen und Sachregister. Edited by various persons. Berlin: D. Reimer, later Ernst Siegfried Mittler und Sohn, later Alfred Zimmermann. (The first volume was published in 1898 but covers the period starting in 1892.)

Neu Guinea Compagnie. 1886-1897? Verordnungsblatt für das Schutzgebiet der Neu Guinea Compagnie. Berlin: Neu Guinea Compagnie. (Succeeded by German New Guinea gazette.)

Papua New Guinea. Gazette. 1888-present. British New Guinea Government Gazette (1888-1906); Territory of Papua Government Gazette (1906-1942, apparently no gazette published 1942-1945); Territory of Papua-New Guinea Government Gazette (1945-1949); Territory of Papua and New Guinea Government Gazette (1949-1971); Papua New Guinea Government Gazette (1971-1975); Papua New Guinea National Gazette (1975-present). Port Moresby: Government Printer.

--Publications of monetary authorities:

Bank of Papua New Guinea. Annual report. 1973/1974-present. Report and Financial Statements. Port Moresby: Bank of Papua New Guinea.

Bank of Papua New Guinea. Bulletin. 1973-present. Quarterly Economic Bulletin. Port Moresby: Bank of Papua New Guinea.

Commonwealth Bank of Australia. Annual report. 1912-1960. Aggregate Balance Sheet of the Commonwealth Bank of Australia (1912-1927); Balance Sheet of the Commonwealth Bank of Australia; and, Balance Sheet of the Commonwealth Savings Bank of Australia (1928-1941); Balance Sheet and Director's Report / Commonwealth Bank of Australia and Commonwealth Savings Bank of Australia (1942-1944); Report and Balance Sheets (1945-1959); Report and Financial Statements (1960). Sydney: Commonwealth Bank of Australia. (This report includes information about the Notes Issue Board during its existence from 1920-1924).

Commonwealth Bank of Australia. Bulletin. 1937-1959. Statistical Bulletin. Sydney: Commonwealth Bank of Australia.

Neu Guinea Compagnie. 1979. German New Guinea: The Annual Reports. Edited and translated by Peter Sack and Dymphna Clark. Canberra: Australian National University Press. (The name of this company was sometimes spelled with hyphens between the first two words or between all three words, and the last word was sometimes spelled as beginning with a K.)

Reserve Bank of Australia. Annual report. 1959/1960-present. Report and Financial Statements (1959/1960-1999); Annual Report (2000-present). Sydney: Reserve Bank of Australia.

Reserve Bank of Australia. Bulletin. 1960-1981. Statistical Bulletin. Sydney: Reserve Bank of Australia. (Contained periodic supplements on Papua New Guinea during the period of Australian rule.)

Reserve Bank of Australia. Port Moresby Branch. Bulletin. 1971-1973. Quarterly Economic Bulletin. Port Moresby: Reserve Bank of Australia, Port Moresby Branch. (Succeeded b the Bank of Papua New Guinea's Quarterly Bulletin..)

--Web site of the current monetary authority (viewed January 2005):

<http://www.bankpng.gov.pg>

--Other publications or Web sites:

Australia. Official yearbook. 1901/1907-present. Official Yearbook of the Commonwealth of Australia (1901/1907-1972); Official Yearbook of Australia (1973-1977); Year Book, Australia (1978-present). Canberra: Commonwealth Bureau of Census and Statistics (1901/1907-1977); Australian Bureau of Statistics (1978-present). (Contains information on Australia and on Australian territories and mandates.)

Australia. Report on New Guinea. 1914/1921-1969/1970. Governor-General, Report to the League of Nations on the Administration of the Territory of New Guinea (1914/1921-1924/1925); Governor-General, Report to the Council of the League of Nations on the Administration of the Territory of New Guinea (1925/1926-1931/1932); Prime Minister's Department, Report to the Council of the League of Nations on the Administration of the Territory of New Guinea (1932/1933-1939/1940); Department of External Territories, Report to the General Assembly of the United Nations on the Administration of the Territory of New Guinea (1946/1947-1949/1950); Department of Territories, Report to the General Assembly of the United Nations on the Administration of the Territory of New Guinea (1950/1951-1965/1966); Department of External Territories, Report to the General Assembly of the United Nations, Administration of the Territory of New Guinea (1966/1967-1969/1970). Melbourne: Governor-General of the Commonwealth of Australia (1914/1921-1931/1932); Canberra: Prime Minister's Department (1932/1933-1939/1940); Canberra : Minister for External Territories (1946/1947-1949/1950); Canberra: Commonwealth Government Printer (1950/1951-1965/1966); Canberra: Commonwealth of Australia (1966/1967-1969/1970).

Australia. Prime Minister's Department. 1937. Official Handbook of the Territory of New Guinea Administered by the Commonwealth of Australia Under Mandate from the Council of the League of Nations. Canberra: Commonwealth Govenment Printer 1937.

Main secondary sources:

Bányai, Richard A. 1974. Money and Banking in China and Southeast Asia During the Japanese Military Occupation 1937-1945. Taipei: Tai Wan Enterprises Company, Limited.

Deeken, Matthias. 1913. Das Geldwesen der deutschen Kolonien. Münster in Westfalen, Germany: Druck der Westfälischen Vereinsdruckerei.

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Mira, William J[ohn] D[ickson]. 1986. From Cowrie to Kina: The Coinages, Currencies, Badges, Medals, Awards, and Decorations of Papua New Guinea. Sydney: Spink and Son (Australia).

Rowley, C[harles] D[unford]. 1958. The Australians in German New Guinea, 1914-1921. Carlton, Victoria, Australia: Melbourne University Press.

Shafer, Neil, and Colin R. Bruce II. 2000. Standard Catalog of World Paper Money, Volume 2: General Issues. Iola, Wisconsin: Krause Publications.

White, R[onald] C[charles]. 1973. Australian Banking and Monetary Statistics 1945-1970. Occasional Paper No. 4B. Sydney: Reserve Bank of Australia. (Contains some statistics on Papua New Guinea.)

World Bank (International Bank for Reconstruction and Development). 1965. The Economic Development of the Territory of Papua and New Guinea: Report of a Mission Organized by the International Bank for Reconstruction and Development at the Request of the Commonwealth of Australia. Baltimore: Johns Hopkins University Press.

Monetary authorities: New Guinea

Monetary authorities: Papua and Papua New Guinea

Exchange rate arrangements: New Guinea (to 1975)

Dates	Official arrangement	Source	Unofficial arrangement, if different	Remarks
1884 -17? September 1914	pegged; 1 local mark = 1 German mark	Neu Guinea Compagnie decree (Verordnung), 19 January 1887, in Deutsche Kolonialgesetzgebung, v. 1: 511, cited in Deeken (1913: 11)		Germany annexed New Guinea in 1884. The 1887 decree took effect on 1 April 1887. The primacy of the mark was reinforced in 1906 (Germany, Currency Decree [Münzverordnung] of 1 February 1905, promulgated in New Guinea, Caroline Islands [Micronesia], [Northern] Mariana Islands and Palau by New Guinea governor's announcement [Bekanntmachung] of 14 September 1906, effective 1 October 1906) (Deutsche Kolonialgesetzgebung, v. 9: 43f. and v. 11: 39, cited in Deeken 1913: 21, 29).
18? September 1914 -10 October 1914	pegged; 20 local marks = Australian £1	Rowley (1958: 62)		The Australian military commander initially agreed to arrangements setting this as rate the exchange rate. It was convenient because it made 1 local mark = 1 Australian shilling. It was also the prewar rate established by the Germans (Deeken 1913: 29).
11 October 1914 -31 December 1914	pegged; 20.50 local marks = Australian £1	Australian administration of New Guinea, order to territorial Treasurer, 11 October 1915, cited in Rowley (1958: 63)		Altered the exchange rate slightly, apparently to conform to the prewar exchange rate between the German mark and the pound sterling.. The Australian Treasury issued a special series of notes denominated in marks as a temporary measure after New Guinea was captured by British and Australian troops during First World War. The notes were dated 14 October 1914 and 5 November 1914 (Shafer and Bruce 2000: 509-10). German-issued coins continued to be allowed to circulate at 1 mark = 1 Australian shilling (Rowley 1958: 65).
1 January 1915 -May? 1942	fixed; used Australian pound	Australia, Currency, Coinage and Tokens Ordinance (New Guinea) 1922, cited in World Bank (1965: 366)		The Australian pound replaced the mark as the unit of account. However, German currency continued to be used. After the Commonwealth Bank of Australia opened a branch on 16 April 1916, it only accepted German coins other than gold at 1 mark = 11 Australian pence. It continued to accept gold coins at 1 mark = 1 Australian shilling (= 12 Australian pence) (Rowley 1958: 66).
May? 1942 -May 1945	pegged; (Japanese) Oceanic 2 shillings = 1 Japanese yen (see Remarks)	Bányai (1974: 8)	Convertibility into Japanese yen was in practice limited.	Japanese forces conquered New Guinea during the Second World War. Control of the territory was divided, and Australian currency continued to circulate in Australian territory.
May 1945 -13 February 1966	fixed; used Australian pound	restoration of Australia, Currency, Coinage and Tokens Ordinance (New Guinea) 1922, cited in World Bank (1965: 366)	See the table for Australia on parallel market data for the Australian pound (later dollar).	Australian forces reconquered New Guinea during the Second World War.
14 February 1966 -18 April 1975	fixed; used Australian dollar	Reserve Bank of Australia annual report, 30 June 1966: 27		Australia introduced the decimalized Australian dollar to replace the Australian pound at Australian $2 = Australian £1. For Papua's exchange rate history since 19 April 1975, see Papua New Guinea.

Exchange rate arrangements: Papua and Papua New Guinea