Stability Vital for Papua New Guinea

by The Patriot

July 28, 2016

In this commentary, I will discuss how social responsibility can either promote or sabotage the ongoing vision currently implemented by the government.

The content of this article is to remind our readers who are easily persuaded by individuals, groups and associations that spread animosity and hate on Facebook Groups and Pages under the context of promoting good governance to change the leadership of the country.

Every government mandated to serve its people in PNG has had to manage a smear campaign that was propagated by persons with a political agenda or affiliation.   The general public, continue to become victims of deception and lies shared on social media. It has become a norm when a government is sworn into parliament, there is always an opposition working to discredit its vision. No one seems to notice that a lot of information uploaded anti-Government Facebook Groups are 20 % truth and 80 % lies.

We were destined to achieve big things in the last 40 years, unfortunately economic prosperity continues to be crippled and plagued by individuals, associations and groups with self-interest and ego. Many successive governments have had to succumb to smear campaign tactics and eventually replaced.

A lot of good things past governments would have achieved for our country did not eventuate because of instability.

Finding Stability in the Midst of Change

In 2012, The Alotau Accord was signed in Milne Bay Province by over 90 MPs to form the current government coalition aimed at delivering on millennium development goals (MDGs) and incorporated into the PNG Vision 2050. Its aim is to grow all sectors of the economy.

We must learn to give credit where its due. The PNC led government contributed immensely to various health, education, sports, communications, agriculture, infrastructure development on schools & roads, and also financial investment portfolios in the country.

We can accept or disregard negative content shared on social media. It is important as to whether we allow PNC and its coalition partners to complete a full term in parliament, or join the hate campaign to discredit the hard work that ongoing or achieved.

Therefore, when we join closed groups on Facebook, we have a responsibility to contribute meaningfully and fairly as members without succumbing to biased opinion.

Individuals who misinform people are dangerous. We cannot allow ourselves to believe ill researched and biased content disseminated on social media by authors with no political experience and leadership quality.

We must be wary of any intending candidates who share content aimed to discredit MPs in parliament.

We must also note that our people are accustomed to expectations in life, which has been an integral part of our culture for many years. For example, we expect our in-laws to pay bride price. We expect compensation payments by those who offend or hurt us. We expect our elders to represent us during family and community events.

We expect this government to do everything for us.  We fail to realise the enormity and sacrifice our PM goes through every single day. He has to juggle between his office responsibilities, political parties, ministerial portfolios, the public service and international trade and bilateral relations.

It is his prerogative to do so on a daily basis because every meeting with an individual(s) on matters of national importance requires collaboration on achieving something.  Every government needs partners to deliver on its goals.

Many times, we do not realize how we are part of the equation in helping to support the government in our own little ways.

We would rather sit and watch government partners in Ausaid, JICA, UNDP, WHO, UNICEF including diplomatic corps do all the work on behalf of us.

Public servants work to ensure vital services are rendered in the rural parts of the country. Religious groups or representatives lead out in church programs to help educate our people on Christian values and principles. NGOs in country co-ordinate and manage workshops on literacy, financial inclusion, community development and gender based issues. Sports Administrative bodies promote sporting codes and manage development sporting programs in our schools and communities with aim to empower our young generation through community initiatives. Families are also partners, and instil values at home. Teachers are also considered partners that help educate future leaders, businessmen and women, public servants, civil servants, sports ambassadors, foreign diplomats, teachers, religious instructors and also responsible citizens in society.

It is our job to influence our peers and those around us to be thinkers and respect our government at all times. This government is working to ensure aging infrastructure is maintained. We then accused them on exuberant building and maintenance costs because we believed information disseminated on social media that targeted certain companies, including the PM. The government continues to strengthen its bilateral ties with international partners and neighbour countries. We then label them as thieves for stealing and wasting taxpayers’ money.

Our government continues to roll out free education and we complain about the shortage in job opportunities. We expect so much but and offer little or even worse, nothing at the end of the day as partners in helping the national government.

There is still a lot of work to be done in the rural areas, however we will sit and complain. This government can and will do so, if we allow them to continue without disruption.

In the last 15 years, we experienced over 8 % growth despite the down turn on global commodities that affected the trading of our kina against the US dollar in 2016.

We accused our government of reckless spending, yet fail to understand a simple business principle that if we are to grow, we must take financial risks to grow our investment portfolios.

Here’s an example; a customer purchases a brand new vehicle at the car dealer. Prior to the purchase, the customer is persuaded by a family member, or friend on the best brand to buy. The customer obviously would have done his or her own homework on what brand suits his or her needs. All brand new vehicles have warranty and pass assurance quality tests to be road worthy.

The lesson to be learnt from such a scenario is how an opinion is only an opinion, and not a fact.

People will use facts and figures to persuade our decision, however we cannot believe everything  posted on various Facebook groups.

Between January and June this year, unsubstantiated articles were shared about our economy facing bankruptcy, which never eventuated. Many of these ‘wardrobe’ scholars do not understand the complexity on how financial markets operate and how economic models are built to sustain loan repayments, as vital investments for our country.

Our decisions can either support individuals and organisations scheming on removing our current PM, or we can simply remove these so called experts on our forums. We must support this government and help it achieve the desired results it set out achieve during the formation in 2012.

We need stability, not instability.



Demystifying the Private Public Partnership Paradigm

by Government Observer

Infrastructure investment is critical to Papua New Guinea’s continued economic success. Our nation must modernize and maintain our roads, bridges, and water systems to help ensure that Papua New Guinea remains a place for businesses to operate productively and grow, which will, in turn, create economic opportunity for Papua New Guineans. Yet years of underinvestment in our public infrastructure have imposed massive costs on our economy. 40 years of underinvestment and neglect in our infrastructure has resulted in a stagnant economic growth.

The need to reverse years of underinvestment in infrastructure, despite tighter budgets at every level of government, calls for us to rethink how we pay for and manage infrastructure investment. Some state and local governments have entered into public-private partnership (PPPs) to provide and manage infrastructure that has traditionally been provided by the public sector. PPPs bring private sector capital and management expertise to the challenges modernizing and more efficiently managing such infrastructure assets.

What is Private Public Partnership (PPP)

The World Bank defines PPP as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance

And from Wikipedia “PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer.[1] In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make the project economically viable. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by guaranteed annual revenues for a fixed time period. In all cases, the partnerships include a transfer of significant risks to the private sector, generally in an integrated and holistic way, minimizing interfaces for the public entity. An optimal risk allocation is the main value generator for this model of delivering public service.”

Under a PPP, a government contracts with a private firm to design, finance, construct, operate, and maintain (or any subset of those roles) an infrastructure asset on behalf of the public sector. When the private sector takes on risks that it can manage more cost-effectively, a PPP may be able to save money for taxpayers and deliver higher quality or more reliable service over a shorter timeframe compared to traditional procurement. When sponsors contract with private partners that support strong labor standards, PPPs can also provide local economic opportunity and create good, middle-class jobs that benefit current and aspiring workers alike. Just as the
re is a range of roles that a private firm or firms can take on in a PPP, the nature of risk-sharing and compensation arrangements for bearing and managing risk can vary substantially from project to project and is governed by contract.


Models of Private Public Partnership (PPP)

  1. O&M: Operations and Maintenance

A public partner (federal, state, or local government agency or authority) contracts with a private partner to provide and/or maintain a specific service. Stadiums in Port MoresbyUnder the private operation and maintenance option, the public partner retains ownership and overall management of the public facility or system.

  1. OMM: Operations, Maintenance & Management

A public partner (federal, state, or local government agency or authority) contracts with a private partner to operate, maintain, and manage a facility or system proving a service. Under this contract option, the public partner retains ownership of the public facility or system, but the private party may invest its own capital in the facility or system. Any private investment is carefully calculated in relation to its contributions to operational efficiencies and savings over the term of the contract. Generally, the longer the contract term, the greater the opportunity for increased private investment because there is more time available in which to recoup any investment and earn a reasonable return. Many local governments use this contractual partnership to provide wastewater treatment services.

  1. DB: Design-Build

A DB is when the private partner provides both design and construction of a project to the public agency. This type of partnership can reduce time, save money, provide stronger guarantees and allocate additional project risk to the private sector. It also reduces conflict by having a single entity responsible to the public owner for the design and construction. The public sector partner owns the assets and has the responsibility for the operation and maintenance.

  1. DBM: Design-Build-Maintain

A DBM is similar to a DB except the maintenance of the facility for some period of time becomes the responsibility of the private sector partner. The benefits are similar to the DB with maintenance risk being allocated to the private sector partner and the guarantee expanded to include maintenance. The public sector partner owns and operates the assets.

  1. DBO: Design-Build-Operate

A single contract is awarded for the design, construction, and operation of a capital improvement. Title to the facility remains with the public sector unless the project is a design/build/operate/ transfer or design/build/own/operate project. The DBO method of contracting is contrary to the separated and sequential approach ordinarily used in the United States by both the public and private sectors. This method involves one contract for design with an architect or engineer, followed by a different contract with a builder for project construction, followed by the owner’s taking over the project and operating it.

A simple design-build approach creates a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project. On a public project, the operations phase is normally handled by the public sector under a separate operations and maintenance agreement. Combining all three passes into a DBO approach maintains the continuity of private sector involvement and can facilitate private-sector financing of public projects supported by user fees generated during the operations phase.

  1. DBOM: Design-Build-Operate-Maintain

The design-build-operate-maintain (DBOM) model is an integrated partnership that combines the design and construction responsibilities of design-build procurements with operations and maintenance. These project components are procured from the private section in a single contract with financing secured by the public sector. The public agency maintains ownership and retains a significant level of oversight of the operations through terms defined in the contract.

  1. DBFOM: Design-Build-Finance-Operate-Maintain

With the Design-Build-Finance-Operate-Maintain (DBFOM) approach, the responsibilities for designing, building, financing, operating and maintaining are bundled together and transferred to private sector partners. There is a great deal of variety in DBFOM arrangements in the United States, and especially the degree to which financial responsibilities are actually transferred to the private sector. One commonality that cuts across all DBFOM projects is that they are either partly or wholly financed by debt leveraging revenue streams dedicated to the project. Direct user fees (tolls) are the most common revenue source. However, others ranging from lease payments to shadow tolls and vehicle registration fees. Future revenues are leveraged to issue bonds or other debt that provide funds for capital and project development costs. They are also often supplemented by public sector grants in the form of money or contributions in kind, such as right-of-way. In certain cases, private partners may be required to make equity investments as well. Value for money can be attained through life-cycle costing.

  1. DBFOMT: Design-Build-Finance-Operate-Maintain-Transfer

The Design-Build-Finance-Operate-Maintain-Transfer (DBFOMT) partnership model is the same as a DBFOM except that the private sector owns the asset until the end of the contract when the ownership is transferred to the public sector. While common abroad, DBFOMT is not often used in the United States today.

  1. BOT: Build-Operate-Transfer

The private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time. In most cases, the private partner will also provide some, or all, of the financing for the facility, so the length of the contract or franchise must be sufficient to enable the private partner to realize a reasonable return on its investment through user charges.

At the end of the franchise period, the public partner can assume operating responsibility for the facility, contract the operations to the original franchise holder, or award a new contract or franchise to a new private partner. The BTO model is similar to the BOT model except that the transfer to the public owner takes place at the time that construction is completed, rather than at the end of the franchise period.

  1. BOO: Build-Own-Operate

The contractor constructs and operates a facility without transferring ownership to the public sector. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. A BOO transaction may qualify for tax-exempt status as a service contract if all Internal Revenue Code requirements are satisfied.

  1. BBO: Buy-Build-Operate

A BBO is a form of asset sale that includes a rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.

  1. Developer Finance

The private party finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site. The private developer contributes capital and may operate the facility under the oversight of the government. The developer gains the right to use the facility and may receive future income from user fees.

While developers may in rare cases build a facility, more typically they are charged a fee or required to purchase capacity in an existing facility. This payment is used to expand or upgrade the facility. Developer financing arrangements are often called capacity credits, impact fees, or extractions. Developer financing may be voluntary or involuntary depending on the specific local circumstances.

  1. EUL: Enhanced Use Leasing or Underutilized Asset

An EUL is an asset management program in the Department of Veterans Affairs (VA) that can include a variety of different leasing arrangements (e.g. lease/develop/operate, build/develop/operate). EULs enable the VA to long-term lease VA-controlled property to the private sector or other public entities for non-VA uses in return for receiving fair consideration (monetary or in-kind) that enhances VA’s mission or programs.

  1. LDO or BDO: Lease-Develop-Operate or Build-Develop-Operate

Under these partnerships arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize, and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.

  1. Lease/Purchase

A lease/purchase is an installment-purchase contract. Under this model, the private sector finances and builds a new facility, which it then leases to a public agency. The public agency makes scheduled lease payments to the private party. The public agency accrues equity in the facility with each payment. At the end of the lease term, the public agency owns the facility or purchases it at the cost of any remaining unpaid balance in the lease.

Under this arrangement, the facility may be operated by either the public agency or the private developer during the term of the lease. Lease/purchase arrangements have been used by the General Services Administration for building federal office buildings and by a number of states to build prisons and other correctional facilities.

  1. Sale/Leaseback

This is a financial arrangement in which the owner of a facility sells it to another entity, and subsequently leases it back from the new owner. Both public and private entities may enter into sale/leaseback arrangements for a variety of reasons. An innovative application of the sale/leaseback technique is the sale of a public facility to a public or private holding company for the purposes of limiting governmental liability under certain statues. Under this arrangement, the government that sold the facility leases it back and continues to operate it.

  1. Tax-Exempt Lease

A public partner finances capital assets or facilities by borrowing funds from a private investor or financial institution. The private partner generally acquires title to the asset, but then transfers it to the public partner either at the beginning or end of the lease term. The portion of the lease payment used to pay interest on the capital investment is tax exempt under state and federal laws. Tax-exempt leases have been used to finance a wide variety of capital assets, ranging from computers to telecommunication systems and municipal vehicle fleets.

  1. Turnkey

A public agency contracts with a private investor/vendor to design and build a complete facility in accordance with specified performance standards and criteria agreed to between the agency and the vendor. The private developer commits to build the facility for a fixed price and absorbs the construction risk of meeting that price commitment. Generally, in a turnkey transaction, the private partners use fast-track construction techniques (such as design-build) and are not bound by traditional public sector procurement regulations. This combination often enables the private partner to complete the facility in significantly less time and for less cost than could be accomplished under traditional construction techniques.

In a turnkey transaction, financing and ownership of the facility can rest with either the public or private partner. For example, the public agency might provide the financing, with the attendant costs and risks. Alternatively, the private party might provide the financing capital, generally in exchange for a long-term contract to operate the facility.

Public Private Partnerships (PPPs) have become a popular tool for funding new infrastructure projects around the world. Using PPPs to develop infrastructure gives Governments the opportunity to move large upfront capital spending off their near term financing commitments. PPP schemes can also play a further role in promoting economic diversification and foreign direct investment.

In 2004, Papua New Guinea passed the PPP Act which it had tabled the bill in 2011. This Act guides the Government on using PPP models in building partnerships with private firms for Infrastructure development in Papua New Guinea.





Development Needs Time

By Hon. James Marape MP

Hi all out there, development takes time, years in fact to evolve. All it takes is stability and consistency in public policies and efforts for development to happen.

Before I expand on this topic of development and deficit budget, may I firstly thank all who have read my previous posts and offered your commentaries. I am the first to admit that Iam no expert in subjects I write on which mostly are my opinions skewed towards my point of view. Secondly some of you wrote contrary to my point view and I accepted them as your points respectively.

In this writeup, I am going to discuss on development aspirations in Papua New Guinea and why we in the current O’Niel Dion Government have embarked on a 5 budget deficit budget plan since

In 2012 when we took office, we looked into the 5 years ( what we describe as the medium term; 2012 to 2017) and we estimated that our total revenue will be less then our development and recurrent expenditure cost. Now the question we asked then was do we sit back handicapped with revenue constraints hence not fund free education, free basic health care, our infrastructure plans, our districts and provinces and etc?

We agreed as a government that we will not sit back but we planned successive deficit budgets to ensure our development targets are met. Today almost into the end of our term results are evident and we stand to be judged on our performance.

Ask education department; they will confirm that one million new children are in our school systems because of free education ( mind you we are working on space and quality aspect as we speak). Most education institutions have new buildings as a result of either national government direct funding ( example 4000 new lodging facility at university of PNG), or PSIP and DSIP for provincial and district schools.

Ask health department; if Port morseby hospital is transformed, if Lae, Hagen, Madang, Kokopo are seeing changes, ask Enga leadership if we have secured funding their Province’s 300 million Kina provincial hospital, ask all provincial hospital CEOs if they have been receiving direct funding from national government starting 2012.

Ask works department; of you can now drive from Kimbe to Kokopo ( never done before 2012), they will tell you 3000 kilometers of new road have been sealed, check Kundiawa to Gembolg, Buluminski highway the last 20km is being sealed, sealing taking place from south to north Bouganvillie ( kokobau Buin road), you drive from pom to Kerema on total sealed road, lae city road improvements and of course port morseby roads. Works are happening in most sections of our most economical road, the highlands highway and it is a work in progress.

Ask the National Airports Corporation; who initiated and funded the port moresby international airport, the mt Hagen, Hoskins and Goroka terminals, the Aropa airport and terminal or Girua airport as a case in point, ask tourism promotion authority on what is happening at gurney airport in Alotau. Check if Kundiawa and other airports have some small work happening since 2012.

Ask PNG ports; who initiated and funded lae ports, Kieta ports, Kimbe ports, port morseby ports, the many small jetties in our coastal areas.

Time and FB space does not permit me to write all that we have undertaken since 2012. All of you PNG citizens come from a district, check your local elected MP for work he or she has done wether as Provincial Governor or District Member.

Contrary to what our oppositions say, on record we as Government directed by our Prime Minister, have given DSIP/PSIP development money equally to all Provinces and Districts including Bulolo. For instance since 2013, 2014 and 2015 we have remitted a total of 30million kina each to ALL 89 districts in PNG. If nothing is happening in your districts then ask your elected leader at elections, that is your right.

I have post below a picture of a 500 bed and study capacity Techical college and a “3 star type”100 bed hospital my Tari district will soon complete that I had started funding for my district in the last three year as an example of work happening in rural PNG as a result of direct money transfer from national government to sub national government agencies unlike in the past where national governments tries to do all.

All these we were able to do because we deliberately structured plans to enter a series of responsible deficit budgets. If you interested all you have to do is read our 2012 budget documents.

Why deficit budget? Because money available in one year is not enough to meet all our development needs.

Is deficit budget only done in PNG? Ask any Australian economist and they will tell you the first 40 years since the world war 2 ended (1945) they structured deficit budgets. Infact last year 2015, their national Debt to GDP was 213%. Their national history is littered with deficit budgets and their accumulated national debt is way higher then ours which presently sits at 29%.

I am presently reading a book written by “Vern Gowdie” published in 2015 and he writes that the most established economies are in huge national debt incurred over many years. For instance Japan 400%, USA 233%, China 217%, Singapore 382%, Philipines 116%, Vietnam 140%, Indonesia 88% to name few countries that we in PNG are familiar with. These countries build their nation and economies by transferring national debt into improving their economy and country in general. Don’t listen to glass house economist who wants us to individually remain below poverty lines.

The roads, ports, airports, schools, health and other interventions are national assets acquired through sustainable deficit financing to grow our economy for our children’s future.

For uu in PNG, in the last four years our debt remains sustainably low and at amounts below 35 percent as required by our fiscal responsibility act. In fact with revised figures in our economic base released recently both by our central bank and national statistical office, our debt to GDP stands at 29 percent.

May I encourage every one out there that we in government are concern about our country just as much as you all concern. We doing our utmost best within confines of constraints we currently faced with, like the 70 % slash in national revenue ( 2014/2015/2016) both from drought related non production at Oktedi and the drop in global oil prices.

If you think that we not doing well leading this country, then in 2017, you have every right to remove the mandate majority of you, our voters gave us in 2012. But for now we will complete the few development tasks we have left to do for this term, including upgrade and sealing completion of untouched sections of the highlands highways like Halimbu to Komo, and Halimbu to Kelabo.

My next post will be on you, citizens and the importance of your constitutional section 50 rights, rights to vote leaders at elections.

Keep in touch. We have many international visitors, head of states, leaders of public services, businesses leaders, sports ( international soccer and cricket). Let’s not talk ourselves down all time , see in the positive always.

James Marape – MP

(please forgive me, Iam writing this post late night one my iPhone hence might be full of mistake and also please know above are just my views, you have yours and I will respect your views just like you have read mine.)

This photo saws my district’s hospital and Techical school campus that we are putting final touches now, an example of DSIP at work.


Structural Adjustment – a Major Cause of Poverty

Last month, Sir Mekere Morauta has advised the Government to seek help from IMF who have been visiting Papua New Guinea. Sir Mekere suggests that only IMF can help Papua New Guinea in this time of Economic downturn.

Let us look at the IMF / World Bank policies on the Structural Adjustment Programme.


Typical stabilization policies comprise:

  • balance of payments deficits reduction through currency devaluation
  • budget deficit reduction through higher taxes and lower government spending, also known as austerity
  • restructuring foreign debts
  • monetary policy to finance government deficits (usually in the form of loans from central banks)
  • raising food prices to cut the burden of subsidies
  • raising the price of public services
  • cutting wages
  • decrementing domestic credit.

Long-term adjustment policies usually include

  • liberalisation of markets to guarantee a price mechanism
  • privatization, or divestiture, of all or part of state-owned enterprises
  • creating new financial institutions
  • improving governance and fighting corruption
  • enhancing the rights of foreign investors vis-à-vis national laws
  • focusing economic output on direct export and resource extraction
  • increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic stock markets).
  • These conditions have also been sometimes labeled as the Washington Consensus.

I have found a video on the web which mirrored  the example of those policies. It’s titled “Am the luckiest NUT in the World”

The Luckiest Nut In The World is an 8 minute video (sorry, no transcript available, as far as I know), produced by Emily James. It is a cartoon animation explaining the effects of loans, structural adjustment and cashcrops, and their impacts on poorer countries. It traces how Senegal was encouraged to grow nuts for export. In summary,

  • As a poor nation without many resources, it took out loans to help develop the industry.
  • Other nations saw this was going well, so they followed suit.
  • The price of nuts started to drop and Senegal faced debt repayment problems.
  • Structural adjustment policies were put in place, cutting spending and reducing government involvement in the nut industry and elsewhere.
  • However, things got worse.
  • At the same time rich countries, such as the US, were subsidizing their own nut (and other) industries, allowing them to gain in market share around the world.
  • Rich countries have tools such as trade tariffs and the threat of sanctions at their disposal to help their industries, if needed.

Thus we are in a situation where the rich promote a system of free trade for everyone else to follow, while mercantilism is often practiced for themselves.

  • “Free trade” is promoted by the rich and influential as the means for all nations to achieve prosperity and development.
  • The wealth accumulated by the richer countries in the past is attributed to this policy to strengthen this idea.
  • That such immense wealth was accumulated not so much from “free” trade but from the violent and age-old mercantilism or “monopoly capitalism” is ignored.
  • Such systems are being practiced again today, and even though they are claimed to be Adam-Smith-style free trade, they are the very systems that Adam Smith himself criticized and attacked.

Political Stability Vs Economic Development

By Professor Gangu Yang

The Namibian General Election 2014 was conducted peacefully. This is an important sign of political stability. Political stability requires that the public interact freely and openly with legislators on a regular basis. Granting individuals a say in how a nation is run enhances the stability of the region. A stable political scene is one where the ruling government is favoured by the population and does not experience strong indicators of social unrest.

slide_57Political stability and economic development are deeply interconnected. The relationship between economic growth and stability refers to the manner in which the political stability of a nation can lead to its economic growth. The common denominator and the most obvious relationship between economic growth and stability is the fact that a stable environment fosters economic growth.
The uncertainty associated with an unstable political environment may reduce investment and the speed of economic development. On the other hand, poor economic performance may lead to government collapse and political unrest. A politically unstable environment usually means that the government is misusing or mismanaging the country’s resources: resources are not being used to their full capacity, or in a manner whereby economic development could be maximized. It is also right that if a country’s political environment is volatile, this will deter investors, foreign trade and economic development.

One of the ways in which economic growth and political stability are related is in the area of investment. No company or individual, whether local or international, will feel comfortable making any kind of capital investment in any country where the political climate is characterised by upheavals and a lot of uncertainty. This is because such a risky investment would go against the main aim of making profits since there would be a marked lack of guarantee as to the safety of the investments. When local businessmen refrain from making any significant investment in their economies, such a situation will affect the economy as a whole.

Foreign direct investment also plays an important role in the development of an economy. This shows a link between economic growth and stability because a country with a low rating in terms of stability will not be a source of attraction for investors looking for international markets in which to invest. An example can be seen in the area of tourism, because when there is a lack of stability in the economy there will be little investments in the form of hotels, tourist attractions and commercial airlines. The result of this is a reduction in the number of employed people and a lower turnover rate for much-needed finances to facilitate economic development.

Namibia enjoys political stability for the past 25 years, which encouraged many foreign investors including Chinese ones. A typical example of this is the rapid growth of the town Oshikango where foreign investors, mainly Chinese, contributed to fast infrastructure development and prosperity of the border town.

China’s political stability attributes to the great social, economic and cultural development. The first thing the Chinese did in 1949 when Chairman Mao’s Communist Party took over was to create political institutions to cater for one unitary state out of all the diverse populations in the country. The communist political ideology was paramount to build that unitary state. The Chinese ruling Communist Party and other political parties (China doesn’t have opposition parties as in Namibia or elsewhere) work together for the same goal to establish a prosperous and stable society for the benefit and wellbeing of the people. To the Chinese government, unity and a politically stable environment are always first items on their agenda. Chinese as a culture value more than any other nations unity, stability and integrity. Building stable political institutions and environments make it possible for China to concentrate on economic development resulting in it being the largest economy in the world now.

In Africa in general, political instability is the biggest challenge to African governments and people. Many African countries are rated low in terms of stability. There are types of political instability in Africa: revolutionary movements to change the rules of the political game and redistribute power and property, separatist movements, political assassinations, mass murders, kidnappings, extortion and violence, strikes, especially politically motivated strikes, demonstrations for regime change or specific issues, complete political breakdown and civil wars. The leading causes of such instability include ethnic fragmentation and/or historic friction; ethnic dominance and historic friction; the strength of “primordial loyalties” (kinship and clan); secessionist impulses; conflict over resource wealth; ineffective or predatory government actions; political inexperience and worsening economic difficulties.

African instability itself explains why Africa still lags far behind other parts of the world in terms of economic development. Thus we need to develop political institutions in such a manner that there is an even playing field and accountability.

Where stability prevails, economic development prospers as we witness in Namibia. Since political instability has a major impact on development, policy formulation should therefore attempt to be “stabilizing”. That is, policies should not disrupt political stability; policies should be fair and equitable across regions, ethnic and income groups; implementation of policies must be careful and politically wise. This done, we will lay a solid foundation for potential economic development

Exxon Vs Oil Search

A few months ago, Oil Search was ready to break the bank to purchase InterOil for a massive US$2.2 billion in what would been a master-stroke from Peter Bolton amidst the Oil Price lumps and favorable gas pricing……..however, a mystery bidder has just been revealed…. Exxon is preparing a whooping US $3 billion bid and spoil the party of Oil Search….

Do we see Oil Search increasing it’s bid when that happens?? Who becomes the winner in this bidding war? Total has already bought most of InterOil assets, the last remaining is up for grab……there is only 1 WINNER…..and that would be INTEROIL !!


JPMorgan is believed to be the investment bank working with Exxon Mobil on a counterbid to rival the current $US2.2 billion ($2.95bn) offer that’s on the table from Oil Search.

The news comes after speculation swept the market in the past fortnight that InterOil_Logo-low-resthe US-based banking powerhouse was working on a $3bn deal in the resources space.

Bankers at JPMorgan — and those at Credit Suisse and UBS, who are the advisers for InterOil — would have no doubt been working through the weekend to assess the latest Exxon offer, which was still understood to be under negotiation on Friday when the company advised the market that another bid had been put forward.

On Friday The Australian revealed online that the mystery bidder was Exxon, before sources close to situation confirmed that was the case.

The focus will now be on whether advisers can firm up the
Exxon Mobil counteroffer by July 28.

For its part, InterOil’s board did not want to comment further until it had a deal in place. InterOil directors said they continued to recommend shareholders approve the Oil Search bid, which is due to be voted on at a meeting on July 28.

Exxon is thought to want InterOil’s stake in the big onshore Elk/Antelope field to help it profitably expand the two-train PNG LNG project that exports gas from the Highlands through an LNG plant at Port Moresby.

Elk/Antelope is part of the undeveloped Papua LNG project that is operated by French oil major Total, which is yet to decide whether to develop the field as a stand-alone LNG plant or try to combine with PNG LNG.

Exxon’s bid, if it becomes binding, will pose a dilemma for Total, which stands to see its control over the Papua LNG project reduced if it does not make a counterbid.

Oil Search, which has stakes in both PNG LNG and Papua LNG, made the initial InterOil bid to promote the merging of the projects, which it says can yield more than $US2bn of savings.

Under a complex deal, Oil Search has agreed to pay 8.05 of its shares for every InterOil share, valuing the target at $US40.25 per share when the deal was inked in May. A contingent value right would also be issued for InterOil, worth $US6.05 per share for every trillion cubic feet certified at Elk/Antelope beyond 6.02tcf when an appraisal well is drilled later this year.

Oil Search, run by Peter Botten, and its advisers, Macquarie Capital and Goldman Sachs, are assessing options.

Oil Search shares on Friday rose 19c, or 3 per cent, to $6.86.