BY HON BART PHILEMON, MP
MEMBER FOR LAE
IN REPLY TO 2007 NATIONAL BUDGET
27 NOVEMBER 2006
I commend the 2007 budged handed down by the Treasurer, Hon Sir Rabbie Namaliu.
What a farce it was for this government to create history by adjourning the budget debate for two weeks after it was presented. It is a reflection of a government losing control of managing Members interest.
Mr Speaker, I am pleased to note that the Treasurer continues to adhere to the fiscal framework established in 2002 when formulating the 2007 budget. These fiscal frameworks without question have now contributed greatly to the macro economic stability enjoyed by this government over the last four years, which have provided strong building blocks for 2007 budget and should continue to do so for any future budget.
If we added up all the billions of kina we have spent through each budget over the last 30 years, it is not hard to see that we have not got value for money spent. There are some leaders in this government that could argue that we have made some positive development since independence. That may be true but if we start to add up all the positive and all the negatives I am sure you will agree with me that the negatives at this stage of our development completely outweigh the positive gains.
Papua New Guinea is richly endowed. We have harvested the fruits of these non-renewable endowments. But we have not so far used the proceeds from these rich endowments to lay down strong building blocks for the sustainable future development for our children and our grand children. The 2007 budget will go down exactly the same track as all past budgets.
The Somare government is making exactly the same mistake that all past governments have made. It is throwing huge amount of money, willy nilly, into National Planning Departments and is mistakenly hoping, that money alone, will salvage our entire development problems. This, of course will not happen, as is the sad case, over the last 30 years. All the billions in this budget as was in all previous budgets will be squandered, leaving behind no tangible building blocks for the future development of our country but a huge liability behind for our children and grand children to carry on.
The Somare Government boast about having a Medium Term Development Strategy as a road map for the public investment programmes. It is a sad indictment of an incompetent government to see that this Medium Term Development Strategy after 5 years is still not completed. The Medium Term Development Strategy in its present form is only a wish list. It still remains, this government’s political rhetoric and political rhetoric it shall remain until such time when the Medium Term Development Strategy priority ranking sectors are fully costed with clear bench marks established for monthly, quarterly, half yearly and yearly monitoring and reviews to ensure that resources are diverted to the right areas and that the resultant outcome is achieved for each of the years within the medium term planned period.
Mr Speaker, this is exactly what Finance & Treasury, under one Ministry have established right at the beginning of the term of this government in 2002. The medium term fiscal strategy and the medium term debt management strategy were developed within weeks soon after this government came into office. The result of this foresight over the last four years is unquestionable.
Mr Speaker, establishing these two medium term fiscal frameworks, has now become the corner stone of the highly successful macro economic stability, this country has ever enjoyed.
The medium term fiscal strategy ensures that the government spending was both affordable and sustainable. It also provides that both expenditure and revenues are managed annually within the 5 year medium term strategy to ensure that the government continually achieves its planned (deficit / surplus outcomes) fiscal outcome. The Medium Term Debt Management Strategy provided that over five years planned period the government lives within its means by ensuring that the debt to GDP ratio of the high unsustainable level of 72% is reduced to a more sustainable level as has now been achieved.
Mr Speaker, when this government took office on 5 August 2002, it had no choice, but to take drastic action and strong economic leadership to break the vicious cycle of reckless unproductive spending of previous successive governments and put in measures, to ensure that the government lives within its means, if we are to save Papua New Guinea from becoming the so called “Failed State”.
However, Mr Speaker, achieving and maintaining macro economic stability on its own, even over extended period of time, is likely to fail, if it is not backed up by strong, effective, micro economic development implementation reforms.
Mr Speaker, this is exactly the dilemma that the Somare Government is facing. It is entering into its twilight period, of its history making existence, as the first government in Papua New Guinea to serve its full term of five years in Parliament, yet it has squandered this golden opportunity of the political stability to really create firm building blocks or develop a spring board of long term sustainable micro economic development implementation reforms to propel Papua New Guinea into a prosperous future.
Mr Speaker, political stability, single handedly underpins social / economic stability and provides strong foundation for future prosperity of a nation. However without visionary leaders, as is the case with the Somare Government, blind leading blind, this opportunity is lost.
Mr Speaker, when this government took office in 2002 every sector within the economic or social areas was in extremely dire need of some degree of resuscitation. All these sectors were symbolically in intensive care unit. All hands were required on deck, so to speak, to bring all sectors out of intensive care unit and slowly nurse them back to health so that each can perform as normal and fully contribute to economic growth.
Mr Speaker, this means that each social and economic sectors within the Medium Term Development Strategy priority ranking or not must develop its own Medium Term Development Strategy, each are costed with clear well established bench marks so that monthly, quarterly, half yearly and yearly monitoring and reviews can be made to ensure that planned targets are achieved. This should provide the yardstick through which performance can be measured and that the resultant values can be determined if our limited resources are well spent.
Mr Speaker, this is exactly the process within which Medium Term Fiscal Strategy & Medium Term Debt Management Strategy operates to give this government the successful macro economic fiscal outcome, over the last few years.
However, sad to say, after four years, and now going into its fifth year this government has miserably failed to develop sectoral packages that specifically and clearly links macro and micro economic sectors. Until this happens, (time will not permit) the Medium Term Development Strategy, the government blue print, for public investment programmes, is just another political rhetoric which will provide no sustainable development benefits for the future development of our children and our grandchildren.
To date, the Somare government is riding high on the crest of one and the only one single wave and that is the wave created by the fiscal reforms, over the last four years. The government could have been riding on the crest of many other waves but that’s not to be as we are now approaching the end of the term of this government. The only wave that the Somare government is creating is the “tsunami” type wave, which destroys everything in its path.
The Planning & Monitoring Department lacks capacity. It is long over due for capacity boosting. On top of that it needs stability at the political level. In four years it had seven political heads (one every six moths). On top of this again, the department cannot be expected to achieve any degree of sustainable result, in its implementation, if it does not have the benefit of the sectoral road map, which maps out clearly on annual basis planned targets.
Mr Speaker, my concern is mainly our children and our grand children’s future. How do we achieve a prosperous future for them if we still have not learnt the lessons from our chequered past, in which billions of kina has been spent, and yet there is nothing much on the ground to show for the billions that has been spent except the huge liability left as a legacy for our future children.
The government must commit itself now to do nothing less than to ensure that proper development plans are in place so that every toea spend not will directly contribute to a brighter future for our children. That it spends K1.00 and that kina produces K2.00 tangible sustainable value for the future. At the moment the government is spending K1.00 but will not achieve any sustainable tangible values.
Mr Speaker, What I am saying is not just playing politics with the Somare government. I am not trying to talk down this government because I was sacked as Minister for Finance & Treasury by this Prime Minister. I have already been on record to express the same concern when I was a Minister in this government. I have rated the government’s performance whilst I was still a Minister, giving it a rating of four out of ten in its performance.
May I remind this Parliament, that recently during the life of this government that UNDP has re-classified Papua New Guinea’s development progress from the second lowest development category of “developing country” to that of the lowest category of “least developed country”. This is an indictment of the lack of the development achievement over the last 14 years in support of the argument I am making.
Mr Speaker, it is always difficult to build confidence in a country with a chequered history like Papua New Guinea. It is so easy to lose confidence. There are already signs of waning confidence with multi million kina contracts being delayed. It is discouraging to see the growing risk of un-prioritised, non-costed, unplanned free spending ahead of 2007 elections.
Given the challenging development needs, the windfall gains should have been spent strictly in the context of highest priority areas such as infrastructure, education, health and law and order. But there needs to be prioritised, properly costed and monitored spending based on clearly established bench-marks and planned oriented outcomes.
The government has completely failed to come up with its policy on state owned commercial entities such as PNG Power, Telikom, Air Niugini etc. It is continuing with 100% state ownership. Once again the government is not learning the lessons of the past. There will always be political interference one way or another. These State Owned Enterprises are seen as the milking cows for political party support; the employment potential as a return favour for political cronies and hence complete disregard to follow the proper appointment process of Fit and Proper persons test for the Board and Management appointments. How can we ever get out of this political quagmire to stop continually pumping good money after bad money into propping up non performing state owned commercial entities? There is no protection from political interference so the millions of kina that these entities are spending to re-capitalise as well as the millions of kina that the state is pumping into these entities will only end up leaving the entities worse off than if the government had pursued a policy of partial privatisation.
Instead of spending the money to resuscitate badly performing state owned commercial entities the government would have been better off using the balance of the windfall to reduce future liabilities, especially debt. Reducing these future liabilities has the best intergenerational impact. It ensures future source of sustainable revenue flows and it reduces the burden for our future children.
Mr Speaker, while there has been some improvements in spending controls and monitoring, there is still much room to improve. I am greatly concerned about the breaking of the link between Treasury and Finance budgets and the Development budget. This clearly, lessens controls, in a system not working well. We should all be concerned especially ahead of the 2007 elections given Papua New Guinea’s past record in this aspect.
Mr Speaker, there are still major difficulties in executing projects, which are delayed, and poorly designed. It is not a big secret, simply capacity is not there.
Mr Speaker, from the knowledge, with the department of national planning, the implementation of the development programmes is moving at a snail pace. That is with the exception of the K1.9m, and I say this with tongue and cheek, already released to Bogia electorate, from the K8.9m allocated under the District Education Improvement Programmes, in the last supplementary budget.
What about the rest of the 88 districts?
What about the K44.5m for District Transport Infrastructure Programme?
What about the K20m for Community Roads Improvement Programme?
What about the K22m Roads and Bridges Programme?
What about the K22m District Treasury Roll-out Programme?
This list goes on and on!
With a month to go before the Financial books are closed, the Finance and Planning Minister, Mr John Hickey, is still not in a position to inform this House on how the funds are expended.
The Minister continues to tell this House that compliance and acquittal process is paramount before funds are released. I totally agree with him on this, however, he fails to understand that district funds are transferred directly to the district treasuries and thereby, when ever there is disbursement, he should have accessibility to the records.
Now we have another two supplementary budgets of K650m for 2006 and K450m for 2007.
If the implementation of the August Supplementary Budget of K682m is any indication, then Mr Speaker, I ask what guarantee is there that the 2007 Development Budget will be executed accordingly with the fiscal frameworks.
Mr Speaker, this government will not admit it, but I firmly believe that it needs a major effort to improve capacity to go hand in hand with new increased spending, to meet urgent important needs. The government needs to understand a fine balance between spending to meet important development needs, and avoid wastage of finite resources this country has.
Mr Speaker, the type of spending and how this government spends is absolutely important, particularly with this government, as in previous successive governments, where execution, monitoring and reporting remains weak, or in the case of this government, remains non-existence.
Mr Speaker, I have already alluded to the fact that this government must take the Medium Term Development Strategy a step further, and fully prioritise and cost sectoral plans over the medium term. This would guide the government, when it decides, how it uses any new windfalls. This will ensure that we use our finite resources to our best advantage. For this government, it is already too late. It has squandered its golden opportunities, and the election is now just around the corner.
Mr Speaker, if the future governments continue to ignore this, then we will continue to fall into the same pitfalls that the past governments have fallen into.
Mr Speaker, the Somare government had the advantage of having the pre-August 2002 period of economic crisis to learn from, and made sure that it manages spending so as to avoid repeating the same mistake as before. This government must understand that much higher spending in the economy that cannot handle it means one thing, and that thing is higher inflationary pressure. If the government is going to spend more, then it needs a more productive economy than we have at present to avoid inflationary pressure.
Mr Speaker, to avoid the foregoing, we must implement more reforms. In recent time the Morauta government has done more reforms in 2 yrs then the Somare government has done in 5 years and it calls for a more open private sector then what exists today.
Mr Speaker, in this respect, I am greatly disappointed that this government has failed to take up front in 2002, the Public Sector reform, in particular, the Right Sizing Programme. This is an important reform area, where this government could have started a process which would have re-allocated significantly from the K1.3billion, unproductive, personal emolument expenditure, to more priority areas.
Mr Speaker, once again, I commend the Treasurer for continuing to apply to the 2007 budget, the medium term fiscal frameworks put in place in 2002.
On the overall macro situation, indications are things continue to go well on the whole.
On the positive side, inflation remains low; exchange rate remains stable; reserves remain healthy; and employment is slowly picking up. The initial calculations on International Monetary Fund across country comparable basis, shows 4 percent surplus in 2005; and 2 percent in 2006.
Mr Speaker, on the negative side, our still high level of debts, and high liquidity levels, could translate easily into inflation, if the government is not careful.
On the growth side, while moderate, is still not high enough to make meaningful difference to the standard of living for the bulk of Papua New Guineans. This is in some ways, reflects the complete failure and incompetence of the Somare government to make full use of its term in government, to develop sectoral strategies to prioritised, and monitor spending based on the established bench-marks, and planned outcomes.
Mr Speaker, there is an increasing and alarming gap developing between other low-income countries and Papua New Guinea. These countries are actually making gains, while we, Papua New Guinea, continue to stagnate in a quagmire.
Sub-Saharan Africa, with much less natural endowment is growing twice as fast as Papua New Guinea, in the face of its reforms.
Other low income countries are following suit through their reforms, growing and moving further ahead of our beloved country, which is more richly endowed. Relative to these countries, Papua New Guinea is slipping further behind, like the proverbial tortoise.
Mr Speaker, Papua New Guinea is a member of the International Community. Within the globalization economic and liberalised free trade concept, we are more and more answerable to the International forums for our action and / or non-action. Domestically we are answerable to our own people. And as the saying goes, Mr Speaker, you can’t talk until you first clean up your own back yard.
Mr Speaker, our backyard has been clearly spelt out in the Millennium Development Goals progress report for Papua New Guinea, 2004. This report covers the areas of (i) Poverty (ii) Primary Education (iii) Gender Equality (iv) Infant and Child Mortality (v) Maternal Health (vi) HIV/AIDS, Malaria and other disease (vii) Environmental Sustainability (viii) Global Partnership for Development.
These are issues of the national development agenda established through our alignment with the incomplete Medium Term Development Strategy. These are the issues, common to every country on the face of this earth, based on fundamental values of freedom, equality, solidarity, tolerance, health, respect for nature and shared responsibility.
Mr Speaker, I leave these issues with today’s leaders and tomorrow’s leaders who may be interested in our children and grand children’s future with this reminder.
After 31 years of wondering in the wilderness, we still have not yet found the land of milk and honey. We have travelled through stormy weather, high waves and arrived at many cross roads. The immediate question we need to seriously ask ourselves is Which Way Papua New Guinea? Which cross Road?
Thank you and God Bless Papua New Guinea.