Tuesday, November 23, 2010

2011 BUDGET REPLY By The Leader of the Opposition Rt Hon Mekere Morauta KCMG MP (Tuesday, 23rd November 2010)

Find below Budget Speech of Opposition Leader Rt Hon Sir Mekere Morauta that was not allowed by Speaker Jeffrey Nape to be delivered .Nape failed to specify under what Parliamentary Standing Order he did not allow Sir Mekere to make his budget speech.


Mr Speaker, the 2011 Budget may set a record in terms of revenue raised and money to be spent, but it may also set a record of money wasted.

The public sector lacks capacity, capacity to convert the billions of kina appropriated every year into public goods and services for our people and for the nation’s future. 

We all know that the public sector is beset with problems: problems of inefficiency, of abuse, theft, wastage and lack of accountability – lack of accountability of resources that belong to the public.

What does this record budget do to address these problems, the very problems that negate the Government’s ability to deliver decent affordable services to people?

Not one thing Mr Speaker; not one thing.

Throwing billions of kina at Departments and Statutory Authorities will not solve the host of problems the public sector increasingly faces.

 These problems are eating away the heart of state institutions, and the Government is doing nothing to solve them.

The 2011 Budget fails to address the capacity problem. 

It fails to address the overarching problem of waste and corruption. 

Control of corruption has deteriorated sharply over the last eight years of Somare National Alliance governments. 

According to one international measure of corruption tracked by Transparency International, PNG is now in the bottom 10% of countries in the world.

Mr Speaker we may have billions of kina to spend, but given our very poor development indicators, especially in health and education, given the huge gaps we need to fill to meet the basic needs and rights of people, and given the real cost of delivering decent services, there is no room for waste or leakage.

Misuse of funds means less money for services. 

As one budget commentator noted:  “If only 10 toea in each Kina went missing over the next five years, that would still be a massive K3.6 billion – enough to rehabilitate and maintain the priority national roads.  And every toea is enough to education 30,000 children per year.”

That is the cost of corruption and waste Mr Speaker. 

A cost met by every man, woman and child. 

It is the people who are the victims of corruption and who suffer its effects in lack of decent health services, lack of decent schools or well-trained teachers, and roads full of pot-holes. 

Corruption is a parasite:  it is truly feasting on the blood and flesh of its host, the people of Papua New Guinea.

What safeguards are being put in place to reduce corruption and to make sure money does not go missing?

 Not one, Mr Speaker; not one.

With our experience of successive so-called “record budgets” over the last few years, Mr Speaker, we should all know by now that money alone will not provide the answers. 

In the last eight years this National Alliance-led government has appropriated well over K50 billion kina. 

What have those budgets produced? 

Almost nothing that we can be proud of, or satisfied with:  a doubling of maternal mortality, an increase in infant mortality and closure of half the country’s health facilities; a sharp reduction in the quality of education,  as detailed in the recent report on universities commissioned by Prime Ministers Somare and Rudd; deteriorating roads – national, inter and intra–provincial roads. 

The level of deterioration is reaching the stage where many of these roads now require not just repair and resealing, but rebuilding.

In the last eight years we have had one government, led by the National Alliance.

 We can no longer blame political instability or frequent changes of Government for the failure in performance. 

During the same period we have also experienced and benefited from the record prices of mineral resources.  This “record” budget mirrors that fact and is built on it.

Mr Speaker, record appropriations totaling over 50 billion kina in eight years under one government. 

What do the nation and people have to show for such a large sum of money?  Not much. 

And until and unless corruption is addressed; until and unless the capacity, management and accountability issues of the public sector are addressed; until and unless the waste and leakage of public monies are stopped, the “record” expenditure of the government will continue to have little positive benefit for the nation and for people.

Record appropriations, one Government in eight years, poor services, the majority of people living in poverty. 


What is it we are lacking? 

The answer to that question, Mr Speaker is good government, led by a good leader.

Mr Speaker, before I offer a few comments on particular aspects of the Budget, I wish to make a few general comments concerning the 2010 and 2011 Budgets.

First, there is very little analysis of the 2010 budget outcome or outturn, that is, how actual spending or performance in 2010 compared to what was planned. 

Without this analysis, it is difficult to judge how the Government might perform in 2011. 

It seems, Mr Speaker, we are travelling blindfolded.

Secondly, there is very little medium-term analysis. 

A lot is said about the spending plans for 2011, but very little about the forward context of these plans. 

We know that service delivery is a multi-year undertaking. 

Investments take time to be delivered, whether they are capital works programmes, text books or essential drugs; recruiting new staff is an ongoing commitment that also often requires new training. 

For example, the budget provides for 1,333 new positions in hospitals.

 No-one would contest that those positions are not needed. 

The question is:  where is the trained staff to fill them? 

To be effective the budget must guarantee a commitment of resources year-after-year, over say a five year period. 

A one year commitment, year to year, is not likely to lead to the outcomes planned to be achieved.

Thirdly, the budget is scarce in details.  

The budget tables show headline budget numbers for planned 2011 spending, but there is scarce information on how this funding will be managed effectively, how it will reach service delivery units, and how it will be translated into goods and services. 

Take the increased budget for drugs as an example. 

Yes, the Government does need to spend more on drugs and essential medical supplies. 

But those that are currently procured are not reaching hospitals or health facilities. 

Theft is common. 

There seems to be a merry-go-round of the very same drugs being purchased not once, but two, three times or more from the same suppliers, after “going missing” from medical stores or dispensaries. 

This results not only in the cost of drugs per unit becoming extortionately high, but also renders many of the drugs to be out of date by the time they ever reach the intended destination. 

What will the Government do Mr Speaker to ensure that the money allocated for drugs is spent efficiently and honestly, and that the people who need that medicine actually receive it?

The only conclusion that any informed or aware observer might reach is that it is not possible to form an accurate assessment of the likelihood that the record spending under this budget will translate into services and into better outcomes for people.

 But if we go on past performance of the Somare Government, we have good reason to be doubtful.

I will now turn to the revenue side of the Budget.

Total Domestic Revenue is projected to yield 7.7 billion kina in 2011, compared to 6.9 billion and 5.7 billion kina in 2010 and 2009 respectively.  Fine, no problems.

However, when the Total Revenue is broken down into Tax and Non-tax revenue, a disturbing trend emerges.

 In 2009, Non-tax revenue totalled 766 million kina (actual). 

The revised estimate for 2010 is 410 million kina, 356 million kina less than the previous year. 

A similar result is expected for 2011, with 411 million kina budgetted.

Mr Speaker, these figures represent a 46% reduction for both 2010 and 2011 over actual revenue received in 2009.

 Total domestic revenue in 2011 is expected to be 35% higher than in 2009, in line with growth in the economy, so why at the same time is there a reduction in non-tax revenue? 

It makes no logical sense.

When one examines the components of non-tax revenue in 2011, one sees two glaring facts:  a significant reduction in revenue collected by government departments and agencies, and no contribution to the budget from commercial statutory authorities.

Why?  Can the Treasurer explain this?

Are we all so besotted with the prospect of LNG revenue that we no longer both to collect other legitimate charges for goods and services?

Take as an example land lease rental revenue to be collected by the Department of Lands and Physical Planning. 

In 2009, K38.3 million was collected in land rent. 

In 2010, K22.1 million was collected, a reduction of K16.2 million or 42%.  In 2011, only K24.8 million is budgeted. 

Why is it that we are not collecting at least the same as the amount collected in 2009?

 Is PNG’s land mass shrinking? 

Or is it a reflection of the incapacity of the Department to collect?

Treasurer, please explain.

It is not just the Department of Lands that is asked to collect less in 2010 and 2011 than it did in 2009. 

Another example is the Department of Foreign Affairs and revenue from passport and migration service fees.  

In 2009, K37.1 million was collected. 

In 2010, only K11 million. 

In 2011, a meagre K2.5 million is budgetted. 

Why the massive reduction? 

Are there less people coming to work in PNG?  I thought that with Ramu Nickel and LNG many more foreigners were coming to our shores to work.  Are they paying no visa fees?

 Or is this revenue just being spent, perhaps by overseas missions on visiting politicians, and never recorded or accounted for?

Mr Speaker, the other area of potential revenue which is of great concern is dividend income, dividends payable by government-owned commercial statutory bodies and from State shares in businesses like banks and oil companies.

In 2009, no dividends were paid.

 In 2010, K55 million was budgeted, but only K38.5 million was received.  K36.5 million of this was paid by Bank South Pacific, with K2 million coming from Petromin.

Where are other monies received by IPBC?

Why are they not being paid to consolidated revenue? 

The Minister constantly reminds us that all the commercial statutory authorities, Telikom, Air Niugini, PNG Power, PNG Ports, etc, are making heaps of profit. 

Where is it?  ]

Apart from not tabling the accounts of these entities for Parliament and the people to see the true picture, Minister Somare is returning none of the profit to the people.

This year, 2010, Bank South Pacific paid 42.8 million kina to IPBC in July and 11.55 million kina in November, a total of 54.4 million kina. 

Why was only 36.5 million of this paid to Treasury? 

What happened to the other 17.9 million kina?

What is happening to the revenue from the state’s shares in Oil Search?

 In 2009 Oil Search paid AUD15.4 million dividend to IPBC, but not one toea of this money (approximately K40 million) found its way to Treasury.  In 2010 Oil Search paid AUD8.5 million, around K22 million to IPBC.  Where is this money? 

What has it been spent on?

 Why is none of it being paid to the legal custodian of monies of the people of Papua New Guinea?

Mr Speaker, the amounts of money that have been paid to IPBC in recent years are very large, with zero reporting, zero public scrutiny, and zero accountability.

 But these amounts pale in comparison with the gigantic sums of money IPBC will receive in the future.

How many of us are aware of the fact that IPBC, under the stewardship of Minister Somare, will receive all the dividends payable by PNG LNG from 2015.

  In the first five years that the project is expected to return dividend, IPBC will receive K1.3 billion kina.

 Between 2015 and 2049, a period of 34 years, IPBC will receive from PNG LNG dividend income totaling K12.5 billion at an average rate of K366 million per year.

Why IPBC?  Revenue to do what?

Apart from the money being available to satisfy the whims of IPBC’s political leaders, perhaps Mr Speaker there is a hint of things to come in the 2011 Budget. 

On top of the dividend income directly received by IPBC, the Government is allocating large amounts of money to its bureaucratic brother, also headed by Arthur Somare.

The Budget papers note that K30 million of the additional money allocated to the Police will be for (quote) “LNG support, to be paid through the Department of Public Enterprises”.

Since when did democratic governments channel funding for police forces through companies and through totally unrelated government departments?

Mr Speaker, why is IPBC allowed to control such large dividend monies?  Should not the monies be paid directly to the Treasury?

 Should not IPBC be allocated an amount for its operational expenditure through the Budget, just like every other Government institution?

Mr Speaker, my conclusion is that we, Papua New Guinea have one Government but two Prime Ministers: one elected, the other appointed by the elected.

Not only do we have two Prime Ministers, we also now have two Treasurers, two collectors of revenue and two overseers of expenditure: one treasury headed by Hon Peter O’Neill and the other by Arthur Somare.

Why is this being tolerated? 

It is not just totally unacceptable; it is frightening.

I repeat Mr Speaker:  in 2011, IPBC will pay no dividend at all to the State.  Why? 

Why is IPBC allowed to retain all it will receive from Bank South Pacific, from Oil Search, PNG Ports, Air Niugini and Telikom?

I ask again, what is IPBC going to do with all the dividend income that it will retain?

Mr Speaker, answers to these questions are just as important to the public as the intoxicated boasting by the Government of its record budget. 

The proof of the pudding is in the eating, not in the ingredients.


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