For any country to prosper and grow in the 20 th century economy, it had to sell its goods and services to other countries in order to be able to purchase those goods it requires but does not itself produce.

For its first ten years after Independence , the Papua New Guinea economy was heavily dependent on Bougainville Copper Limited (BCL). Payments by BCL to the Government arose through corporate taxation, dividends, personal income tax, royalties, customs duties and withholding tax. These payments in a country with a narrow tax base represented a major source of internal revenue.

In terms of the balance of payments, copper concentrate, which contains copper, gold and silver, was PNG's major export. During the first ten years of production at BCL, the kina value of concentrate exports totalled K2.4 billion or approximately 48% of the country's total exports during that period. The export of commodities was the cornerstone on which the Government's hard kina policy was founded. This was a key factor in containing inflation to levels that are acceptable in an open economy such as that of Papua New Guinea .

As well as the initial expenditure during construction BCL was a significant investor. Capital expenditure in the first ten years since start-up amounted to approximately K300 million. Approximately half of this was funded by retained earnings, which totalled K155 million at the end of 1981 and was an expression of BCL's confidence in the future of Papua New Guinea .

In 1983 the PNG economy was under continuing pressure with the prices of major export commodities remaining depressed. Consumption and investment expenditure, apart from the development of the Ok Tedi mine, were at low levels. In June, a new Australian Aid Agreement was announced under which Papua New Guinea would receive an additional K45 million to the end of 1985/86 fiscal year. This new agreement tied the level of aid to the contributions BCL made to the Papua New Guinea economy.

From 1972 to 1989, 51% of Papua New Guinea's export earnings came from mining compared to 15% from coffee, the second highest export earner.

BCL is recognised as the major pioneer investor in Papua New Guinea . During its years of operation, BCL provided directly and indirectly a significant proportion of all wealth created in the Nation. During the time of BCL's operation, this wealth underwrote the growth of the Nation from its Independence and BCL was proud of its record of achievement. One way to look at BCL's contribution to the PNG's economy is to consider what the PNG economy would have looked like without BCL. Exports would have been reduced by 45%, Government internal revenue would have been 17% lower, and the Gross National Product would have been much reduced by the loss of the indirect effects of BCL's operations.

Within the North Solomons Province from 1972 to 1988 BCL contributed directly K75 million in royalties and K19 million in cash compensation although this was seen as restitution for losses rather than a benefit of the mining operation. In 1989, royalties paid amounted to K2.8 million. The Provincial Government share of this benefit was K2.7 million, with the remaining K0.1 million being paid to the landowners.

In 1989, considerable assistance was provided to set up some care centres for displaced local villagers and tangible support was given to the Government's survey and planned rehabilitation program of destroyed village property.

The weaker Australian dollar and the reduction in the Australian Government's untied aid to Papua New Guinea , reduced substantially the real value of Australian economic support to Papua New Guinea in 1986. The Papua New Guinea Government response was to reduce government services and to increase the incidence of indirect taxation. These additional imposts fell disproportionately on the mining industry and associated infrastructure so had a significant deleterious effect on the industry's international cost competitive position.

In 1987 droughts in the north coast area and on some of the islands had a detrimental impact on rural production. In addition, the fall in world coffee prices was estimated to have cost the country about K85 million in lost revenue, despite the slightly higher coffee quota allocated to Papua New Guinea in 1986/87. Gold and hydrocarbon deposits of considerable promise were discovered, and held the potential for generating significant economic activity and export income in the future. BCL continued to press for the exploration moratorium on Bougainville Island to be lifted.

The impact of the loss of BCL production on the Papua New Guinea economy was considerable. Despite the suspension of operations in 1989, BCL contributed more than K200 million to the Papua New Guinea economy that year in the form of wages and salaries, purchases of supplies and services, and tax payments on 1988 earnings. The principal impact was from 1990 onwards.

At all stages during the crisis there have been close consultations between BCL and the Government. The Government recognised that BCL had no option but to scale down its establishment and eventually withdraw employees from the island.

Since inception until cessation of operations on 15 May 1989 the mine produced concentrate containing 3.1 million tonnes of copper, 306 tonnes of gold and 783 tonnes of silver. The production had a value of K5.1 billion which represented approximately 44 % of Papua New Guinea 's exports over that period.