Can PNG convert growth into development?

Author: Stephen Howes, ANU
East Asia Forum

Papua New Guinea experienced yet another year of high growth in 2012: GDP growth over the past 10 years has averaged close to 6 per cent.

Growth is expected to slow this year, but the medium-term outlook remains positive.
Yet the World Bank’s new country strategy for PNG states that poverty levels ‘have not changed significantly over the last 15 years’. In the capital, Port Moresby, poverty has actually risen over this period.
Many refer to the last decade as one of lost opportunity. Government revenue almost tripled, but there seems to be little to show for it. The recent observations of one PNG researcher, Andrew Anton Mako, are telling:

I am from a very remote village deep in the Highlands of PNG. In the last fifteen years, the single health center, the primary school which I attended as a boy, an airstrip that brings supplies to the village, and agricultural extension services have all closed down, and shrubs are now growing on a new road which was built in the late 1990s to connect my village to the nearest town. The 10,000 plus people in that part of the country are literally struggling each day.

How can PNG do a better job of converting growth into development?
There are no easy answers, but five issues will loom large in 2013. First, the new O’Neill-led government has decided to spend big, increasing expenditure by almost 30 per cent in the 2013 budget, pushing the deficit from 1 to 7 per cent of GDP, and devolving expenditure to lower levels of government. Effective expenditure is key to improving development prospects, but the new budget strategy is fraught with risk. The projections which return the budget to balance by 2015 assume real cuts to government salaries, which brings their credibility into question, but the bigger issue is whether the large increase in funds will be well spent.
The government also announced in the budget a review of mining taxation. This is particularly welcome because of suspicions that PNG’s mineral projects are riddled with tax exemptions.
Second, 2013 will be an important year for PNG’s new sovereign wealth fund (SWF). Too often, the SWF is seen as the key for PNG to avoid the resource curse. In fact, it’s only one piece of the puzzle, and it remains to be seen whether the SWF will make a positive difference. With the decline in commodity prices, it now seems unlikely that any funds will flow from government tax revenue into the SWF in the foreseeable future. But dividends from the country’s mega LNG Project also go to the SWF. Whereas tax revenues were to be saved (in the Stabilisation Fund), the dividends will be spent (through the Development Fund). Yet the legislation to determine spending rules for the Development Fund has not yet been seen.
That’s a real gap, and a risk: depending on design, including fiduciary restraints, the SWF might make things worse than if the dividends were received and spent within the budget, like any other revenue source. Since LNG dividends will start to flow in 2015, the government has to fix this problem soon.
Third, the O’Neill government has been commendably active on corruption. But will we see in 2013 the establishment of an Anti-Corruption Commission, its key election promise?
Fourth, state-owned enterprises continue to be a drag on development rather than an agent for change. Essential services, such as electricity and water, are under state control and are dysfunctional for that reason. As former prime minister Sir Mekere Morauta has suggested, there seems to be a choice in PNG between ownership by the people and services to the people. Unfortunately, despite widespread agreement that the Morauta government’s 2002 privatisation of the PNG Banking Corporation was wildly successful, privatisation remains off the agenda.
While there might not be progress in this area in 2013, there could be regress. Most of PNG’s state-owned enterprises are held by a trust, the Independent Public Business Corporation (IPBC), on behalf of the government. The Asian Development Bank has recommended that the IPBC be converted from a trust to a holding company, and PNG’s minister for state-owned enterprises seems particularly interested in Singapore’s Temasek Holding Company as a potential model. If the IPBC is corporatised, it is only going to make it easier for the government to develop new enterprises, and for state involvement in the economy to grow rather than shrink.
Fifth, gender is a critical issue for PNG, a country where gender-based violence is an epidemic. As a result of last year’s elections, there are now three female members of parliament, up from just one. Three is still a small number, but the increase could be significant. Between them, the three hold the posts of minister, deputy minister and provincial governor. Two are party colleagues of the PNG treasurer, Don Polye. If the three MPs can get support from powerful allies such as Polye, there is at least a possibility that 2013 could be the year in which gender at last gets the attention it deserves in PNG.
Overall, opportunities and risks in PNG are finely balanced. On the positive side, not only is there more revenue and more job creation, but with the passing of the political torch from Somare to a younger generation has come a welcome impatience for change, and a number of promising initiatives. And political stability was regained in PNG last year. But, as the Somare era showed, political stability is not sufficient for development in PNG. This year won’t see a turn-around in PNG’s development prospects, but how the government handles the five issues above will go a long way to determining whether it will be a year of development progress or regress.

Stephen Howes is Professor of Economics and Director of the Development Policy Centre, Crawford School of Public Policy, the Australian National University. An expanded version of this essay is also posted here.

Legal challenge to Manus launched in PNG

Source: AAP

Papua New Guinea's opposition has launched a legal challenge to the Australian government's asylum seeker processing centre on Manus Island.

A legal challenge to Australia's asylum seeker processing centre on Manus Island has been launched by Papua New Guinea's opposition.
Lawyers acting for PNG Opposition Leader Belden Namah filed a summons with the National Court on Friday.
Mr Namah said in a statement that he regretted taking the action against the PNG government but he believed the processing centre was unconstitutional.
"The ministers of the O'Neill-Dion government have now received a summons to appear and defend their conduct in the National Court," he said in a statement.
Mr Namah said the detainees on Manus were being held illegally in PNG.
"We will take this matter as far as necessary to ensure that the values of our nation's constitution are upheld," he said.
"This legal challenge also attempts to remedy the many abuses of PNG law and of ministerial powers which have given rise to the situation on Manus."
Mr Namah said the opposition challenged the right of the government to force people seeking refugee status in Australia to enter PNG, where they were being held "illegally and indefinitely under inhumane conditions".
"We challenge the right of the government to make this arrangement with the government of a foreign nation, again in contravention of our constitution," he added.
The injunction seeks to have the current detainees released and to prevent the government from receiving or detaining any more asylum seekers from Australia.
"I am confident that our justice system will succeed in upholding this truth, where our government has so regrettably failed," Mr Namah said.
The National Court is yet to set a date to hear the challenge, the ABC reports.

Highlands farmers pay tribute to Sir Barry Holloway

By WILSON THOMPSON

President

Highlands Farmers and Settlers Association

  Highlands Farmers and Settlers Association (HFSA), on behalf of farmers and executives and also the shareholders of its Farmset Ltd, expresses its condolences to the immediate and extended family of late knight and senior statesman, Sir Barry Holloway, and also to the people of Kainantu and Obura-Wonenara, who he lived and worked with and always had them to his heart apart from other districts in Eastern Highlands.

 Two school of thoughts were present with Sir Barry promoting communal ownership of business with government involvement that saw people in Kainatu and Obura-Wonenara contributing to ‘Komuniti Kaunsil Bisnis';  and Ian Downs, Leahys and Sir Sinake Giregire pushing for individual business.

 The HFSA was on other side in the province as can be seen in elections.

 HFSA Members of House of Assembly (MHA) in 1964-1968 were Ian Downs, Regional; Bono Azanifa, Henganofi/Lufa; Giregire, Goroka; and Muriso Warebu, Okapa.

  Sir Barry Holloway was Member for Kainantu, first MHA, that comprised Obura-Wonenara from 1964-68.

 He contested Regional in 1968 but was won by Sir Dennis Buchanan from HFSA.

 Sir Barry won Regional in 197​2 and won 1977, 82 and lost to Aita Ivarato in 1987.

 The Kainantu seat was won in 1968 by Mike Casey, HFSA executive. 

 Casey did not contest and Moses Sasakila, HFSA,   won. In 1977.

Sir Barry’s faction in Yubiti Yulaki and Undapmaina Kalugane won the new Kainantu and Obura-Wonenara seats that were split in 1977.

 By 1964, farmers’ company Highlands Commodity was running with Leahy family and in 1969, Farmset Ltd came into Kainantu to compete with Sir Barry's Kainantu Kaunsil Business in general trade and coffee such Clarence Plantation.

 Under the plantation scheme, Sir Barry acquired plantations under Kainantu Plantation Trust and KKB, while on west side, it was individuals in business groups and developmnt corporations.

  Sir Barry lost Regional seat in 1987 and contested later including recent elections but did not suceed.

 He suceeded Perry Kwan as Speaker and later became Minister for Finance and Education.

 Sir Barry was instrumental in Kainantu Kaunsil Bisnis (KKB) and ironically KKB acquired more than 40% shares of Farmset.

 With challenges in business, Sir Barry steered KKB to sucess and in last 10 years become Chairman of farmers company, Farmset Ltd, and KKB became dominant in Kainantu.

 In battle of business ideology, it is coincidental where Kainantu was included in Kaindi for Regional seat that comprised Bulolo, Markham, Menyamya and Sir Barry was first MHA for Kainantu and Obura-Wonenara.

 Ian Downs, the president of HFSA, was MHA for Central Highlands from 1964 to 1968 and was the chairman of Farmset.

 In all, Sir Barry sort of fought with HFSA in politics, coffee and business and did suceed to have Kainantu and Obura Wonenara Councils own huge business portfolio and internal revenue.

 Farmset benefitted with his leadership , but for Sir Barry's KKB to take over,  our late president, HFSA and founders of Farmset,  Sir Sinake,  says Sir Barry "em brata blong mi" and knew and looked after people and farmers’ interest.

 It would have been fitting for Sir Barry's funeral in PNG, but it is unfortunate the people will miss him, and his legacy and will be long rememberd in Kainantu and Obura-Wonenara and by farmers and people of Eastern Highlands through KKB and Farmset.

Prime Minister: Landing of plane in Port Moresby under probe

Prime Minister Peter O’Neill said today an investigation is underway into the alleged unauthorised landing of a charted plane at the Jackson Airport in Port Moresby last Friday.

 This plane is allegedly a chartered jet with certain foreign nationals on board en route to a country in the region.

 “The landing of this aircraft in the country is now the subject of an investigation," O'Neill said.

Prime Minister Peter O'Neill

" Its crew and certain individuals on board are being questioned by relevant government agencies as part of this investigation.

 “The arrival of this plane has been the subject of intense scrutiny by the media and speculations and allegations in the last two days.

 “These speculations are baseless and false. 

"From information made available to me to date, there is no evidence of improper conduct or dealing by any minister in my cabinet.

 “The investigation by police, immigrations and customs (IRC) is still ongoing and once it is concluded, the full facts will be announced to the public.

 “These organisations will announce their findings and determine what to do with the plane, its crew and the individuals that were on board.” 

O'Neill will not condone alleged international criminal fugitives arriving on PNG soil illegally. 

O'Neill today categorically rejected  as "evidently false" a local newspaper front page story and viral social media allegations linking his government to alleged fugitives arriving in a Boeing 737 jetliner which made an unexpected illegal landing  at Jackson's Airport on Friday evening.

 "To link that aircraft's unexpected illegal landing, its passengers and cargo to anyone including my ministers and myself is utterly and absolutely false," the Prime Minister said. 

"These allegations which obviously are speculative and designed to smear our government are not supported by evidence and therefore are not true, period!"  

O'Neill said the incident was being investigated by police, customs, civil aviation and immigration authorities.

 "The government's appropriate law enforcement agencies are handling this matter," he said.

 "I have received no report of the investigation yet. 

"I have been made aware of the incident. 

"Whether the passengers are  internationally wanted persons for alleged crimes will be made known after the investigations.

 "Similarly, we will know what type of cargo is aboard that aircraft after the probe.

 "I appeal to Papua New Guinean social media commentators and mainstream media workers and organisations to be responsible and truthful when commenting or writing about national issues."

Prime Minister pays tribute to Sir Barry Holloway

The death of Sir Barry Holloway will be deeply regretted across Papua New Guinea, and especially in the Eastern Highlands province, Prime Minister Peter O’Neill said today.

 O’Neill said Sir Barry Holloway first arrived in PNG exactly 60 years ago – in 1953 – and he had served the nation, and the people, with dedication ever since.

Sir Barry Holloway

 “He arrived in the then Territory of Papua New Guinea at the age of just 18 to serve as a patrol officer, initially on Bougainville, and then in a remote part of the Madang province,” he said.

 “Sir Barry subsequently moved to the Eastern Highlands, and his association with the province continued right up until his sad passing.

 “He was a genuine man of the people in every way, and when he sought election to represent the people he was successful, reflecting the wide support he enjoyed among the people.

 “He served in the pre-Independence House of Assembly, and was Speaker of the House of Assembly between 1972 and Independence in 1975, when he was appointed to the first post-Independence Cabinet, headed by Grand Chief Sir Michael Somare."

 O’Neill said Sir Barry held a number of senior portfolios including Finance and Education during his 20-year career as an MP.

 O’Neill said Sir Barry was one of a group of overseas-born MPs who supported Sir Michael Somare to become the first Chief Minister, and then founding Prime Minister.

 “At Independence he was one of the first to take up citizenship," he said.

“He had no hesitation in renouncing his Australian citizenship, and embracing the new nation of Papua New Guinea.”

 O'Neill said Sir Barry continued to serve the community after he left Parliament.

 In fact, he sought re-election to Parliament as recently as the 2012 national elections. He polled very strongly but was in the end unsuccessful.

 “Sir Barry Holloway was passionate about rural development and education.

"He was campaigning for better services for the rural majority of Papua New Guineans until just a few weeks ago,” he said.

 O’Neill said Sir Barry held strong views - views he did not always share, but at all times he respected Sir Barry’s passion for PNG.

“On behalf of the Government, and the people of the nation, I pay tribute to his long and distinguished service to Papua New Guinea, and I extend our deepest sympathy to his family, and his many, many friends,” he said.