Abel’s 100 DAY PLAN explained

100 DAY PLAN EXPLAINED IN PARLIAMENT

1st December 2017

The 100 Day, 25 Point Plan expires on the 2nd of December, and in the light of prevailing circumstances was and is intended to demonstrate proactive and inspire confidence and kick start the Alotau Accord II by understanding specific activities around.

  • MAINTAINING FISCAL DISAPLINE AND BOOSTING FOREIGN EXCHANGE
  • GROWING OUR REVENUES
  • STRENGHTENING OUR ECONOMIC BASE AND IMPROVING OUR GOVERNANCE and
  • ACTING STRATEGICALLY

 

These activities obviously roll into point 1 and 2of the 25 Point Plan which are the 2017 Supplementary and 2018 Budgets.

The intention of points 1 and 2 was to maintain fiscal discipline in the light of the prevailing difficult circumstances in terms of our budget parameters of 2.5 % fiscal deficit and debt to GDP of 30% so as not to put more stress on government financing and the economy.

A number of measures were undertaken to maintain the discipline but primarily as per Point 4, and thanks to the understanding of Honourable Members of this Parliament, the Service Improvement Program was reduced in 2017.

Pont 3 was related to payroll strengthening and the Ospeac (Organisation, Staffing and Personal Emoluments Committee) has been reactivates and is progressing a payroll audit and cleansing exercise and the NID registration requirements as explained by the Minister for Public service in Parliament. This is response to the primary cost escalation factor of Government which is the unsustainable growth in personal emoluments.

Point 5 was for;

  1. The drawdown of the balance of the Credit Suisse loan of which two technical requirements will have been met following the budget session enabling the final balance to be drawn.
  2. To access World Bank and ADB Budget support funding for the 2018 budget. This has been achieved following my trip to Washington where the world Bank will provide US$100m for debt restructuring in 2018 and another $100m in both 2019 and 2020. The ADB is also providing budget support commencing in 2018 for the health sector for up to US$300m commencing in 2018.

These measures provide financial resources at good terms and bring in foreign exchange.

 

Point 6 was for ;

  1. Oil search to provide a minimum of 50% of the crude oil needs to the Napanapa Refinery and in Kina terms. This has been achieved through an agreement and is happening.
  2. Transition to gas powered electricity – The Pom Gas 58MW electricity project has been approved by Cabinet and has commenced construction to provide the cheapest in the country power source using our own gas and all sales dominated in Kina. The power plant will be owned d by oil search and Kumul Petroleum with shares to be taken up by MRDC. The availability of domestic gas can catalyse other gas powered initiatives.
  • Rice production – the lrice quota scheme has been delayed and 3 large scale rice projects are being developed with 3 separate private sector partners and potential support in the 20187 budget through the Agriculture Commercialisation Fund.
  1. The Bank of Papua New Guinea intervention into the forex market was US$100m is done. The BPNG is now conducting a review on all foreign currency accounts and the oligations od those account holders, particularly resource companies to remit excess funds back to PNG.

 

Pont 7-  For non-tax revenue collecting agencies to remit 90%  of their revenues to CRF has commenced and with some immediate action with specific agencies and will be reinforced by the Public Money Management Regularisation Bill 2017approved by Cabinet and to be tables in conjunction with this budget.

 

Pont 8 and 10 – Relate to tax regime reform and this is being managed through the new Medium Term Revenue Strategy, developed in conjunction with the IMF and a new tax Administration Bill which I will bring shortly. Measures will commence in the Budget to tidy up the tax code and the BPNG, IRC, IPA and commercial banks and cooperating to enforce compulsory Tax Identification Number requirement for opening bank accounts. The commercial banks have agreed to provide information to the IRC regarding bank accounts. The commercial banks have agreed to provide information to IRC regarding bank account being operated in a business manner for further scrutiny. Significant funding support is provided in the 2018 budget for both the IRC and the Customs to boost capacity against quantified additional revenue collection

 

 

Point 9 – The establishment of the task force for IRC, Lands, Customs and Illicit Trade. Funding has been provided in the Supplementary Budget and the Attorney General, Labour and Immigration Ministers are leading the Customs and Illicit Trade, Lands Minister- the Lands task force and Treasurer – the IRC task force.

 

Point 11 – Progress of some significant resource development projects and Wafi Golpu, PNG LNG expansions, Papua LNG are all on track for early works, pre FEED or FEED in 2018. Western LNG has announced pre FEED works last month.

 

Point 12 – The launch of the new Australian DEFAT grant funded project, the PNG- Australia Economic and Social Infrastructure Program and ANGAU Hospital re-development design and still pending, and the TB project co-funded with the World Bank has had the financing documents executed already.

 

Point 13 – The power projects;

  1. The 58MW Pom Gas project construction has began
  2. The 30MW PNG Bio Mass project with Oil Search is in progress
  • The Ramu 2 180MW Project has had commercial close via a Cabinet decision but is pending financial close due to certain conditions precedent.
  1. Naoro Brown River Hydro Project is progressing with funding from the World Bank
  2. Hela Gas power solution is being negotiated with Exxon Mobil and Oil Search. In the meantime funding is provided in this budget to pull the powerlines from Mendi to Hides to provide the missing power and NBN telecommunications link to access power to communities from the Ramu Grid and surplus from the Tari existing generator.

 

Point 14 – Certain High Impact Projects

  1. The international submarine cable from the Australian Government has now offered to fund from Sydney to Port Moresby and Port Moresby to Honiara, PNG will own these 100% and 50% respectively and will substantially increase reliability and lower cost of data in PNG some 25 times.
  2. The Pacific Maritime Industrial Project has had a few financing agreements signed with the China EXIM Bank.
  • The Sepik Plains agriculture Project together with Baya Valley and the Central Plains are identified for large scale rice production as described earlier.

Point 15 – The commercial of the US$1 billion upgrade of the Highlands Highway of which the Project Management Unit has been established at Works and contracts have been advertised for supervisory contractors. Work will commence in 2018.

 

Point 16 – The Gerehu 3B Affordable Housing Pilot Project where 1762 allotments have been made available free to qualifying citizens. The earthwork has been completed and power and water services are being constructed. Together with the concessional funding at BSP, this will make housing accessible to ordinary Papua New Guineans and drive construction and employment. It can provide an example to duplicate in other centres.

 

Pont 17 – Commencement of the New Enga Provincial Hospital construction and Mount Hagen Hospital PPP redevelopment plan in 2018.

 

Point 18 – The ceasing of closed tender financing which Cabinet has approved and the bringing forward of the National Procurement Authority Bill which is ready to come back to Cabinet after changes were requested by Cabinet.

 

Point 19 – Requires audited accounts for SOEs and Statutory Authorities by Mid-2018.As treasurer it will be tabling all the reports for the Agencies under my responsibility as soon as they are cleared by Cabinet.

 

Point 20 – Have all prescribed Boards appointed. This is underway, particularly under the State Enterprise Minister and Agriculture Minister.

 

Point 21 refers to thr freeing up resource land owner benefits;

  1. The PNG LNG Land owners vetting issues are ongoing but royalty payments to the plant site land owners have commenced and it is anticipated to shortly resolve the pipeline first payments and the progress to conclusion the clan vetting at the gas fields.
  2. The Ok Tedi land owners CMCA and non-CMCA have funds held in trust that have been cleared by the courts and I am waiting on advice from the Justice Department to authorise some of the pending contracted works against those funds.

Point 22 – Proposed to suspend proposed amendments to the Lands Act, In the IPA Act, the Agriculture Investment Act, the Agriculture Administration Adjustment Act and the Mineral resource Authority and the Mining Act to allow further consultation. This has been done.

 

Point 23 – Refers to the National Energy Authority Bill. This should refer to the Petroleum Authority Bill which is being finalised in Parliament.

 

Point 24 – Refers to progressing the Population Policy and finding has been provided in the 2018 Budget under the Sustainable Development Program at Planning for this.

Point 25 – Refers to Medium Term Development Plan 3 to be published in 2018. This is a 5 year development plan and indicator targets for the government of the day which will incorporate the United Nations sustainable Development Goals.

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2018 National Budget – Economic & Development Policies

FOREWARD

It is my great pleasure to deliver the 2018 National Budget which is my first substantive budget as the Treasurer in the new O’Neill-Abel Government. The 2018 Budget marks the beginning of the new Medium Term Fiscal Strategy 2018-2022 that aims to confront the current set of challenging fiscal conditions with vigour, including the current subdued economic conditions and depressed revenue, strengthen the macroeconomic and fiscal fundamentals of the economy, and get the economy moving forward.

At the same time, the Budget will the Government’s social spending priorities and improve the opportunities for people and the standard of living for ordinary Papua New Guineans.

In recent years the PNG economy has endured a series of economic shocks following the rapid growth brought about by the commodity boom and the construction of the PNG LNG project. Commodity prices have fallen and remain relatively low and the severe drought in 2015 added to the difficulties.

A foreign exchange imbalance has developed which has further constrained economic growth, together with rising debt levels and domestic financing constraints. We have had to respond to these shocks by cutting discretionary spending, mostly from the capital budget, which has further suppressed economic conditions.

The shocks have had a much greater impact than initially anticipated and continue to have an adverse impact as we end 2017.

Total government revenue has collapsed as a share of the GDP from 20 per cent in 2012 to 13.4 per cent in 2016 and is expected to decline further to below 13 per cent by end-2017. This has resulted in larger than anticipated budget deficits and delayed the projected return to a balanced budget.

Furthermore, within the overall expenditure envelop, a number of categories have expanded, particularly personnel emoluments and interest costs. As part of its decisive and responsible management of the economy, when the lower economic growth rates were realised, the Government pursued fiscal consolidation with a significant reduction in expenditure over the past few years.

However, given the difficulty of even slowing the growth in these rigid categories of expenditure, especially against a backdrop of the continuation of subdued economic conditions, most of the burden of adjustment fell on the much-needed and productive capital expenditure Budget.

The 2018 Budget and medium-term strategies we have formulated will combat these adverse trends and get the economy moving forward again with some momentum. The strategy will pursue three parallel paths: (i) to halt the declining revenue trend then lift collections onto a higher sustained rising trend over the medium term; (ii) to reign back locked-in and less productive expenditure categories onto more sustainable paths to create space for a lift in more productive capital spending that will get the economy moving significantly forward again; and (iii) improve debt management and cost of financing and extinguishment of the foreign exchange imbalance.

The international outlook is becoming more positive, commodity prices have started to trend higher and international capital, particularly into emerging markets, is starting to expand as investor’s appetite for risk improves. We need to be ready to capitalise on these more positive international developments. The APEC summit in 2018 will allow PNG to showcase its

readiness for enhanced capital and trade flows. The 2018 Budget will provide the platform for fixing our fiscal problems and then building optimism for growth and development.

The Government announced its intentions in a 100 Day Plan to kick start the Alotau Accord 2. The 25 policy actions of the Plan were specific interventions aimed at restoring fiscal discipline, addressing the foreign exchange imbalance, enhancing revenue, strengthening our economic base and improving governance and were reinforced in the 2017 Supplementary Budget. The 2017 Supplementary Budget and 2018 Budgets are Points 1 and 2 in this Plan.

The Accord also operationalises the longer term development plans based on Vision 2050 and StaRS. These will be articulated against specific indicators and sectoral interventions in the upcoming Medium Term Development Plan 3, according to the National Planning Act, 2016. There is a specific focus on reinvigorating growth through SMEs and the tourism and agricultural sectors that will underpin broad based and inclusive economic growth structures.

In the 2018 Budget the Government will establish in the commercial banks a dedicated SME fund of K100.0 million for concessional lending, and an agricultural commercialisation fund of up to K100.0 million. Furthermore, a number of key policies associated with the 2018 APEC agenda will be progressed, such as advancing financial inclusion through financial literacy programs, adopting digital financial services and spreading mobile banking capabilities.

Importantly, the Government will continue to invest in key national infrastructure programs in 2018, particularly, the Highlands Highway, coastal jetties, the missing link roads program, hydro and gas power generation stations, and the international submarine cable project. These are important transformational projects that will reduce the cost of doing business, improve market access for rural farmers, and improve and lower the cost of communications for businesses and consumers.

The Government’s key policy priorities and programs, such as the Services Improvement Program, tuition fee free and free health care programs will be maintained to ensure the board- based consumption and delivery of goods and services to our people.

The 2018 National Budget Expenditure envelope is set at K14,718.0 million against a revenue projection of K12,731.0 million. This translates into a fiscal deficit of K1,987.2 million, or 2.48 per cent of GDP. This is expected to maintain the total debt-to-GDP ratio at just above 32 per cent of GDP, which is well within the approved range of 30.0 per cent to 35.0 per cent of GDP prescribed in the Fiscal Responsibility Act (amended 2017).

The 2018 Budget is consistent with the stringent and prudent fiscal anchors established in the new MTFS 2018-22 which comprise:

  • Lifting the total revenue (excluding grants) to GDP ratio to 14.6 per cent in 2018 and to target 14.0 per cent by 2022;
  • reducing government expenditure from 18 per cent of GDP in 2018 to 16 per cent in 2022;
  • reducing the government debt to GDP ratio to 30 per cent by 2022 and ensuring the sustainability of the debt profile, including the shift towards external financing through budget support loans from the World Bank and ADB and through an inaugural US Dollar bond issuance program;
  • maintaining the non-resource primary fiscal balance on a trajectory that will achieve a zero annual average balance over the medium term (to 2025);
  • ensuring that Personnel Emolument costs are contained and brought down from 49 per cent of total non-resource revenue in 2017 to 31 per cent by 2022; and
  • ensuring that two-thirds of primary expenditure is allocated to key MTDP Enablers and that the public investment to GDP ratio is lifted from 4 per cent of GDP in 2017 to at least 6 per cent by 2022.

To fund the adjustment costs and lift the economic growth momentum, yet stay within the set medium term fiscal anchors, the 2018 Budget will focus decisively on revenue through the first ever Medium Term Revenue Strategy which has been developed with the International Monetary Fund.

The Strategy has had substantial input from the Government’s 2015 comprehensive Tax Review and recent technical assistance from an International Monetary Fund team. Some of the key initiatives to be implemented in 2018, include the establishment of a large taxpayers’ office to improve compliance and tax service, a number of tax measures to raise additional revenue and the announcement of the drafting of a new Tax Administration Act to modernise and simplify tax administration.

The Government is also introducing legislation per the 100 Day Plan compelling all statutory authorities and other government agencies collecting non-tax revenue under statute to remit the collection of those funds to the Consolidated Revenue Fund. The Government has also commenced the process of transferring trust fund balances and assets back into the Consolidated Revenue Fund and enhancing the dividend flows from state-owned enterprises.

Financing the 2018 Budget will be critical and much will depend on the portfolio shift towards lower-average cost external debt and this will be achieved by seeking highly concessional World Bank and ADB budget support funding that will be combined with a US Dollar commercial bond program. The portfolio shift will also: firstly, relieve pressure on the tight domestic security market allowing the development of the less risky, longer term domestic bond market; secondly, increase the level of credit to the private sector; and, finally facilitate the extinguishment of the foreign exchange imbalance.

There are important adjustments to the tariff regime and housekeeping tax legislation.

Overall, the 2018 Budget is a forthright step towards strengthening the resilience of the PNG economy to withstand future economic shocks. It lays the groundwork for fiscal consolidation and it will reignite the economic growth momentum and boost optimism for the future. It will provide the platform to showcase the best of PNG to the world at the upcoming APEC summit.

It is “Time to pull our socks up and go for it”.
I commend the 2018 Budget to the Honourable Members and to the people of Papua New

Guinea.

……………………………………
HON. CHARLES ABEL, MP
DEPUTY PRIME MINISTER AND MINISTER FOR TREASURY

http://www.treasury.gov.pg/html/national_budget/2018.html

 

 

Australia connects Papua New Guinea & Solomon Islands

16th November 2017

In a week when same-sex marriage, dual-citizenship and Manus Island dominated the news cycle, Prime Ministers Malcolm Turnbull and Peter O’Neill still found time on the sidelines of the APEC summit to strike a deal that should not go overlooked. Turnbull announced that Australia will majority-fund an new undersea high speed telecommunications cable between PNG and Australia, with a similar deal in the works for Solomon Islands. This is a welcome development, and long overdue.

The potential for ICT and internet access to contribute to development is well documented. The ICT sector directly contributes US$465 million to the PNG economy, and is expected to contribute US$2.5 billion by 2040. Almost every major business is reliant in some way on the internet to connect into the global economy, making reliable and affordable internet access no longer a luxury but a basic requirement. Despite its importance, internet access in Papua New Guinea and Solomon Islands is prohibitively expensive, the most expensive in the Pacific region and indeed the world.

For those that can afford it, the existing infrastructure is also completely unreliable. The current PNG cable can only handle 5% of the bandwidth of a modern one, and could collapse any day. Most telecom providers (all in Solomon Islands) still rely on satellite, so when it rains (and it rains a lot in the Pacific) you lose your connection. A new cable for both PNG and Solomon Islands is a no brainer, and it is something that the private sector has been demanding for some time.

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So why has it taken so long?

The cost of a new cable is not, relatively speaking, prohibitively high. The cable to Solomon Islands was budgeted at US$70 million, and I have seen estimates for the PNG cable at anywhere between US$85 to US$100 million. Australian aid to PNG, by comparison, is $550 million per year and $140 million to Solomon Islands. These are projects the World Bank or the Asian Development Bank (ADB) would eat up, and loans have been in discussion with both organisations for at least the last five years, but have never taken off. The reasons are numerous: sclerotic multilateral processes, changing government priorities (or lack thereof), multiple funding options, and nefarious back-end deals have all no doubt contributed.

All of these factors combined and came to a head in dramatic fashion this year in Solomon Islands. With an ADB loan approved and tendered, the government out of the blue announced that, instead, Chinese company Huawei would be building the cable. The lack of transparency around this deal led the ADB to pull out. It also raised immediate red flags in Canberra’s intelligence community, leading the Australian government to essentially veto any chance of Huawei plugging into Australia’s domestic fibre-optic infrastructure. Huawei is also heavily engaged in PNG, and has committed to constructing a national broadband transition network in the country.

The new national security imperative has clearly jolted Australia into action. In order to short circuit the risks that might come with any future delay in these projects, Australia has offered to pay to get them done. PNG and Solomon Islands will benefit from not having to pay (or repay a loan down the track), and from finally having this much-needed infrastructure actually built. Australia will benefit from protecting our national interest and building goodwill in the region. It’s a rare win-win for anyone not working in Huawei’s Pacific branch.

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The announcement still does raise some interesting questions that will need to be answered before the full benefit can be realised. Is this funding going to be additional to existing aid investments? Carving it out of our existing aid programs will be incredibly disruptive, and could reap more harm than the benefit the cable would bring. Who will own this infrastructure? How will Australia ensure that the savings we are providing by giving this infrastructure to the Pacific will be passed on to the consumer? How will domestic regulation catch up so that the quality of service is also transferred to the consumer? Anyone who has had experience with Australia’s NBN knows that while having the infrastructure is certainly a prerequisite, it is no guarantee of service. For Solomon Islands, how much support will the deal have under its new Prime Minister? Most important of all, how soon will this project get started? Any delay will only open the door for further unpalatable deals, and the private sector will suffer.

None of these lingering questions take away from this being a most welcome win-win for Australia and the region. Now we just need to get it done.

https://www.lowyinstitute.org/the-interpreter/australia-makes-welcome-pacific-connection

 

 

Manus Regional Processing Centre – A look into its History!

The Manus Regional Processing Centre is one of many offshore Australian immigration detention facilities. The Centre was operated by Broadspectrum (formerly known as Transfield Services) on behalf of the Australian government, until Ferrovial bought out the company and its contract in April 2016. The Centre is located on the PNG Navy Base Lombrum (previously a Royal Australian Navy base called HMAS Tarangau) on Los Negros Island in Manus Province, Papua New Guinea. It was formally closed on 31 October 2017, however hundreds of detainees refused to leave.
The Pacific Solution 

The centre was originally established on 21 October 2001, as one of two Offshore Processing Centres (OPC). The other OPC was the Nauru detention centre. The OPC facilities were part of what became known as the “Pacific Solution”, a policy of the Howard Government in Australia, which was implemented in the wake of the Tampa affair. The policy involved the excision of Australian external territories (Christmas Island, Ashmore and Cartier Islands and Cocos (Keeling) Island) and other islands in the Pacific Ocean—from the Australian migration zone. Unlawful maritime arrivals (boat people without visas seeking asylum in Australia) who arrived at these excised territories were transferred to the OPC facilities where they would stay while their claims for asylum were processed. The centres were managed by the International Organization for Migration (IOM)


Disuse 

The Manus Regional Processing Centre fell into disuse in preference to the Nauru centre. In July 2003, the immigration department announced that the centre would be wound down and the remaining detainees would be granted asylum and resettled in Australia, however the centre would continue to be maintained in case the need for reactivation arose.
Aladdin Sisalem, a Kuwaiti-born Palestinian, fled Kuwait in 2000 and in December 2002 arrived at an island in the Torres Strait where he claimed asylum, and was sent to the Manus centre. For ten months, Sisalem was the sole detainee at the centre, with a small staff of guards and cleaners for company. In May 2004, he was resettled in Melbourne.
2008 closure

With the election of the Rudd Labor Government in 2007, the Manus Regional Processing Centre was formally closed in early 2008,fulfilling an election promise by Rudd to end the offshore processing system.


Regional Resettlement Arrangement 

Main article: PNG solution

In 2012, a significant rise in the number of irregular maritime arrivals saw the “asylum issue” become a political liability for the government. The Gillard Government commissioned Angus Houston, former Chief of the Defence Force, to lead an expert panel to conduct a review of asylum arrangements. Among the 22 recommendations made in the Houston report was one to re-open the OPC facilities on Nauru and at the Manus Regional Processing Centre.
2012 re-opening 

In November 2012, the Manus Regional Processing Centre was re-opened by the Labor government, due to the large volume of irregular maritime arrivals. Then Immigration Minister Chris Bowen stated “At this stage, family groups are best accommodated on Manus Island, as opposed to Nauru”. The British services company G4S was responsible for its operation. In March 2014, the contract with G4S expired, and the Australian government entered into a 20-month contract worth AUD $1.22 billion with Broadspectrum (which operates the facility in Nauru) for facilities management including building maintenance and catering, with security provided by Wilson Security.
Death of Hamid Kehazaei

On 24 August 2014, 24 year old Iranian asylum seeker Hamid Kehazaei sought medical treatment at the detention centre’s clinic for an infected wound. Kehazaei’s condition worsened and he could not be treated on the island. Medical staff sought his immediate evacuation, but permission was not granted until 26 August. Kehazaei was declared brain dead in a Brisbane hospital on 2 September 2016. With his family’s permission, his life-support was switched off on 5 September 2016. An inquest into Kehazaei’s death began in the Coroner’s Court in Brisbane on 28 November 2016. The article “The day my friend Hamid Kehazaei died”, written by Behrouz Boochani, tells the story of Kehazaei’s death.
Declared illegal 

On 26 April 2016, the Supreme Court of Papua New Guinea found that the Centre breached the PNG constitution’s right to personal liberty, and was thus illegal.[10] It said:

“ Both the Australian and Papua New Guinea governments shall forthwith take all steps necessary to cease and prevent the continued unconstitutional and illegal detention of the asylum seekers or transferees at the relocation centre on Manus Island …” ”

Late on 27 April 2016, Papua New Guinea Prime Minister Peter O’Neill announced that the processing centre would be closed, saying his government “will immediately ask the Australian Government to make alternative arrangements for the asylum seekers” and that “we did not anticipate the asylum seekers to be kept as long as they have been at the Manus Centre”. He said that Papua New Guinea was proud to play an important role in stopping the loss of life due to people smuggling. O’Neill said negotiations with Australia would focus on the timeframe for the closure and for the settlement of legitimate refugees interested in staying in Papua New Guinea.
US resettlement deal

In November 2016 it was announced that a deal had been made with the United States to resettle people in detention on Manus (and Nauru) Islands.
Alleged Defence Force attack

On 14 April 2017, asylum seekers and centre staff alleged they had been shot at by locals. Ray Numa, Chief of Staff of the Papua New Guinea Defence Force, confirmed that staff at Lombrum Naval Base were investigating the involvement of PNG defence personnel in the attacks, stressing that misuse of weapons was a serious breach of military discipline, and that the police would prosecute any members breaching civil laws.
A class action suit on behalf of persons detained on Manus Island from 21 November 2012 until 19 December 2014, and 21 November 2012 until 12 May 2016 was brought by lead plaintiff Majid Karami Kamasaee against the Commonwealth of Australia, G4S Australia and Broadspectrum. The claim was in negligence and false imprisonment. Kamasaee was represented by law firm Slater and Gordon.[16]

Slater and Gordon reached a settlement with the Commonwealth of Australia, G4S Australia and Broadspectrum on 14 June 2017 for $70 million plus costs (estimated at $20 million), with no admission of liability. Immigration Minister Peter Dutton said the settlement was not an admission of liability and the Commonwealth strongly refuted and denied the claims brought in the class action.


2017 closure

The Centre was formally closed on 31 October 2017. However, nearly 600 men refused to leave the centre claiming “.., to fear for their safety…”, according to Immigration Minister Peter Dutton. A notice posted during the night by PNG Immigration authorities said “The Manus RPC will close at 5 pm today” (31 October), and that all power, water and food supply would cease. The PNG military is to retake control of the area. Alternative accommodation has been provided at the East Lorengau Refugee Transit Centre and West Lorengau Haus.

From Wikipedia 

DETERIORATION OF PUBLIC ADMINISTRATIONIN PAPUA NEW GUINEA

VIEWS OF EMINENT PUBLIC SERVANTS

By: Lynn Pieper

INTRODUCTION

 

This article presents the personal views of eminent former or long-standing Papua New Guinean senior public servants on the deterioration of public administration in Papua New Guinea (PNG). Whilst there is a wealth of reports on this topic produced by academics or consultants, there is limited information documented on the views of Papua New Guinea’s own experts in this area. Yet it is now well recognised that, without a high degree of sustained local commitment and ownership, most externally-driven initiatives to reform public administration in PNG have limited impact. This paper is an initial step in helping Australia develop a deeper understanding of what Papua New Guineans themselves consider to be the key issues influencing public sector performance and the priority areas needing reform.

 

In-depth, one-on-one interviews were held with a number of eminent former or long-standing PNG senior public servants during March 2004, which allowed for free-ranging discussion of issues they themselves believed to be of most importance. Interview questions were deliberately broad, focused on obtaining their views on the quality of public administration in PNG through the years since independence, the degree of deterioration and prospects for redressing current problems, main causes of deterioration of public administration, key decisions or actions needed to restore effective public administration, and the role of donors (either in contributing to the problems or assisting with solutions). This report attempts to synthesise the views and ideas of those interviewed, without interpretive comment.

THE GOOD YEARS – WHAT MADE THEM SO?

 

There was consensus amongst all those interviewed that public administration in PNG was excellent until the early 1980s.

 

Everyone shared a common agenda. People were energised, prepared, and completely focused on doing what was right for the country. There was a strong nationalistic drive in PNG to be independent of colonial powers and to run its own affairs as a country.

 

There was robust and frequent debate amongst and between senior public servants, Politicians, political advisers and senior public servants disagreed on many things, but shared the common goal of building a strong country, so there was openness to debate, and debate was frequent, robust and constructive. Also, because politicians and bureaucrats worked closely together, Ministers and departmental heads always presented a consensus view publicly, so there was no confusion in the community.

 

There was strong, centralised control of monetary and fiscal policy. Sector budgets were closely coordinated, and institutional, budgeting and public administrative systems all functioned well.

 

Senior public servants were generally better educated than politicians. This meant politicians, most of whom were young, relied on the advice of public servants, and did not interfere in decision-making relating to public sector management. The onus on public servants to brief their ministers well was strong.

 

“Teamwork was the name of the game” amongst senior public servants, within and across departments, and through to provincial administrations. This strengthened the ability of the public service to process policies through to implementation. It also established institutional knowledge amongst senior managers, not only of their own organisation but of the entire system of government administration through to the community level. The benefits of consultation for cohesive policy were visible.

 

The public service was independent and professional. Public servants had job security and personnel were unaffected by politics. There were proper checks and balances in the system, and they were adhered to. In relation to performance management, for instance, the challenge of trying to be better than or equal to work colleagues meant people worked hard and strove to improve. Promotions were merit-based. On the flip side, penalties such as demotion, pay cuts, or dismissal were applied when staff did not meet expectations. The Public Services Commission (PSC) was powerful (the commissioners were known as “the three gods”), independent of politics, and fundamental to the charter of the public service.

 

Public servants were well trained, dedicated and closely in touch with basic service needs in provinces. Although transport facilities were far more limited than today, public servants got out of Port Moresby far more frequently, and worked closely with counterparts in provincial and local level government departments. At a central level too, departments worked much more closely with each other. Public servants had a strong sense of community service obligation which generally promoted community participation in development activities in local communities (as opposed to the handout mentality that is prevalent these days).

 

There was a dynamic team of young and committed expatriates, who were not in PNG for financial reasons, but for the challenge of helping an emerging nation.

 

Sir John Crawford at the time (1977) commented that PNG was running the country so well on all fronts that he could see nowhere it could go except down.


CHANGING DYNAMICS

Even during the early post-independence period, interviewees point to certain dynamics which, over time, contributed to increasing politicisation and gradual weakening of both the management and operations of the public sector in PNG. From the mid-1980s, the dynamics in favour of poor administration took much stronger hold.

 

There was a move away from traditional bureaucratic procedures. The move, post-independence, to “de-neutralise” public servants was an attempt to hasten change, as required by the independent constitutional review. The ethos and modus operandi of the Australian model for public administration were thought to be too heavily rules and procedures driven and not commensurate with PNG’s needs for public administration at the time.

 

A cadre of political advisers was put in place to provide alternative advice to that being given by the “old guard” of Australian-trained public servants. At the time, there were many highly competent people around, and this was seen as a desirable move – both to strengthen the competency of political leaders and to promote contestability. But over time it led to “all sorts of pseudo advisers coming out of the woodwork to influence Ministers” – one interviewee referred to these as “UFOs”.

 

The lines between politics and administration began to blur. There was an increasing feeling amongst politicians that the bureaucracy was too powerful and independent, and not astute to political needs. Although most politicians had little or no experience in public policy or organisation management, by the mid-1980s they were generally much better educated, and a belief grew that they “knew it all” and did not need to rely on the advice of public servants. Public resources increasingly became controlled by politics rather than public policy, and politicians began involving themselves in administration, project management, and senior appointments.

 

Within the public service itself, professionalism and ethics were eroded over time. Young and highly qualified graduates also felt they “knew it all”, wanting to be at the top without learning about the procedures and systems. The localisation program allowed this; it was easy to be promoted without sufficient skill levels during the 1980s. Later in senior management positions these people were ill-equipped to guide professional practices. Today, many public servants have had no exposure at all to “the old work ethic”, and believe current flawed practices – be they corrupt, inefficient, or unprofessional – to be the norm. Some are playing politics for personal gain; some for survival; and others because they know no different.

 

“Why do people criss-cross? Self interest drives much of it.” When combined with the continuing long-standing pressures of PNG’s wantok system, the trends toward cronyism and political interference in public administration meant newer breeds of politician or public servant were quickly absorbed into a “Me first, country second” approach to their roles, a trend which has yet to be arrested.

 

Expatriate personnel were in contracted, line positions, subject to normal lines of command, discipline, and public service ethics. The shift to off-line, advisory support during the 1980s, whilst a well-intentioned part of the localisation process, “was a step backwards” in the opinion of interviewees. Apart from being much more expensive, it has created a feeling of condescension between ‘advisers’ and their ‘counterparts’; reduced sustainability prospects by separating the work done by advisers from the ‘normal’ work of departments; created a dependency by Departmental Heads on using advisers to fix problems rather than training nationals to learn the job by doing it; destroyed the collegiate sense that previously existed (“we used to work and socialise together”); and eroded any sense of pride in achievements – counterparts do not have any sense of ownership of results, and advisers today “are not long term stayers”.


SOME PIVOTAL DECISIONS

 There were also certain key policy decisions, taken in good faith at the time, which eroded the checks and balances in PNG’s public administration system and opened the door to corruption. Interestingly, all those interviewed point to the same decisions and events as having been pivotal.

 

Control of sectoral budgets. By the early 1980s, certain line agencies (eg: education) were very well managed and obviously competent to control their own budgets. A sense of resentment over the tight central control and coordination of financial matters was developing in these agencies, a view with which the central controllers – the “Gang of Four” – had some sympathy. Plans were underway to give a greater degree of control to those agencies able to manage their sectoral budgets, and “sector funds” were being trialled. At this time, the Deputy Prime Minister and Minister for Transport argued that the transport sector budget was his to control. He axed the National Public Expenditure Plan, and took over decision making on allocations within the infrastructure budget. Agriculture then followed. This was the first real move to political control of public sector management, and to using public funds as slush funds. It was also the first step towards bad public administration.

 

Control of senior public service positions. By the mid-late 1980s, it became fashionable to introduce private sector culture into public services. In PNG, this trend coincided with the growing desire of politicians to control public resources. The powers of the PSC were reduced dramatically, senior public service positions became contract rather than permanent appointments, and departmental head appointments were made by Cabinet, rather than the PSC. In theory, the intention was to strengthen the role of departmental heads. In practice, the result has been that Secretaries (and often other senior personnel) change whenever a new Minister is appointed. This has seriously undermined the professionalism of the public service, causing departmental heads to focus only on the short-term, and to play political games in their own attempts at survival. It has also enabled politicians to get too close to operational areas within the public service.

 

Decentralisation – the 1995 Organic Law. Interviewees consider PNG’s three-tier system of government is not functioning as intended. Although intended to clarify the system, the 1995 revisions to the Organic Law added to the problems. PNG is now “over-governed”, and the system itself is hampering effective service delivery. All layers – of government, public sector institutions, and decision-making – are disaggregated and unfocused. Provincial governments have been unable to meet the expectations of them, and local governments have not been empowered. The end result is that significant funds are tied up in administration rather than development, services are not being delivered, and the gap between government and people is widening, not closing. Further, priority setting differs at national and provincial levels, so priorities cannot be reflected in a unitary way.

 

Adding to these complexities, resource needs calculated for provincial and local level governments in 1998 were never honoured by the national government. According to interviewees, the major problem was that the funding formula under the Organic Law reflected political expediency rather than economic reality. Grants were calculated on the basis on population and land mass; provinces had not been paid the full grants since 1995 when the Organic law was passed.

 

Demand for government services increased and the public service machinery could not effectively deliver. Politicians, being concerned with survival, had to devise other delivery systems by taking greater control of the funding allocation to provinces. Thereafter, development grants were added to the funds of members of parliament, who now determine what funding goes where, and this may or may not match district priorities. In any case, interviewees argue that PNG’s systems cannot support this many layers and institutions. PNG is now “over-democratised” and its problems have become multi-faceted.

 

The pace of localisation removed the foundation that had underpinned effective public administration in PNG. Significant expertise was lost from critical positions and, over time, as less experienced people took over key positions, productivity declined, inefficiencies took root, and the demand for service delivery forced the public service to grow in size – more people were needed to do the same jobs that had previously been done by a few. Nobody looked at the affordability of rapid recruitment at the time. Five to ten years later, it became clear that the rate of growth of the public service had outstripped PNG’s economic capacity.

 

Embracing globalisation added to the pressures confronting PNG at about this time.  PNG had to adhere to international commitments on various global issues such as the environment, trade, commerce, and economic performance, which not only placed additional pressure on the Government and the public service to meet those obligations, but at times also diverted attention from core domestic problems.  


EARLY OPPORTUNITIES TO ARREST THE DECLINE?

One interviewee suggested it is wrong for critics to be too severe in their indictment of PNG’s performance. At the time (through the 1980s), nobody said “hold on, we are heading in the wrong direction”. Whilst there had been some clear examples of deliberate mismanagement or poor decision making, he felt much of the country’s current situation could be attributed to missed opportunities, unforseen disasters, and voluminous resource flows.

 

The Leadership Code II was an attempt to focus political leaders on sound management of the country. Prior to this, politicians had been required to declare any personal business interests; the new code required them to sell off those interests. It was disagreement over this new Code that led to the first major break in the Somare/Chan coalition in the early 1980s.

 

The degree of instability in tenure since the early 1990s (for both politicians and senior public servants) has made finding solutions to PNG’s problems more difficult, even where they were recognised early. Although leaders under the Leadership Code II must forfeit any business interests, the likelihood that they will last more than 18 months (if elected at all given the proliferation of parties) makes many potential leaders reluctant to leave the private sector. Likewise, the shift to politically-controlled, contract appointment of departmental heads from the late 1980s has seriously limited the capacity to arrest deterioration of public administration. Since then, Secretaries have reportedly served on average only 12-18 months before losing their positions. Since they must be the champions of change within the public service, and cultural/attitudinal change takes time, even the best of them have been able to achieve little. According to one interviewee, this degree of instability now means PNG will never attract good public servants back from the private sector, even though such mobility may be desirable.




THE ROLE OF DONORS

 According to interviewees, the demise of public administration in PNG was largely self-inflicted. On the justifiable assumption that the sovereign government did concern itself with development, donors supported government priorities, whether rightly or wrongly. In PNG however, one can see with hindsight that, whilst government concerned itself with development in social sectors to some extent, little attention was paid to managing economic growth. At the time Australian budget support ceased, despite the fact that it was phased out over several years, PNG was not adequately prepared to be able to finance the gap, and lost the flexibility to fund priority programs. Budget support had allowed PNG to adopt a sense of complacency about the affordability of public sector salaries and programs and, by the time it ceased, the problem was already too large.

 

PNG did not reprioritise development expenditures, continuing to spend as it always had, and introducing “band-aid solutions” whenever problems emerged. Strategic development planning was never considered as a critical vehicle to guide long-term development and, as a consequence, the main focus was on annual planning, because this provided the means for political expediency. Then, from 1998, in response to World Bank reluctance to approve a second structural adjustment loan to finance PNG’s budget shortfall unless certain conflicts of interest were first addressed, PNG instead sought to find commercial loans and tried to launch an international bond float. “Forced” to borrow from the Central Bank, PNG further increased its excessive debt burden.

PUBLIC ADMINISTRATION IN PNG TODAY

 As one interviewee put it, the failure to arrest deterioration of public administration has been “a matter of momentum”. The public service today is characterised by “muted frustration”. Its independence and professionalism have been eroded. Politics has usurped and devalued the fundamental role of public administrators – providing good technical advice to Ministers. The blurring of roles between politics and bureaucracy has derailed national and sectoral policies, led to gross inefficiencies, and left a demoralised and insecure public service. People do not see it being in their interest to change the nature of PNG politics, and the bureaucracy feels powerless. As one interviewee put it, “being a departmental head in this country is a nightmare”.

 

Within departments, lines of authority and discipline have collapsed, due to frequent changes in leadership, lack of direction on priorities, and an increasing lack of accountability and transparency in the public administration system. As these systems have broken down, service delivery has been adversely affected, and qualities such as honesty, trust, dedication, and the spirit of working together industriously have disappeared. The ethics of public service are no longer upheld. Another consequence has been a breaking down of nationalistic commitment within the public service. Personnel tend to be consider their province first, and region second.


WHERE TO NOW?

 Although “the constitution needs a major overhaul” to address both political and policy dilemmas, most interviewees believe the failure to address these seriously to date is to some extent a resource problem rather than a lack of will. In their view, government interventions/initiatives introduced by the 2002 Somare Government and preceding Morauta Government are starting to have impact, but it is too early to see visible results as yet. The emphasis on fire-fighting means there are pockets of impact, but there is still no integrated focus to the reform efforts. The key for PNG lies in assuring the integrity of key institutions, maintaining consistency, and working to approved plans. Most of the legislation, policies and systems already in place are good. But they are only as good as the people who work the systems. PNG’s problems are more to do with implementation than with policy. At the same time, before more effective approaches can be put in place and implemented, decision-makers need to reach consensus on what they want to achieve. In essence, the decision to be made is whether they want what is best for the country in the long term or what is best for individuals in the short term. Following are the issues that interviewees feel are of highest priority for PNG looking forward.

 

Reform PNG’s political system to reduce the constant political changes. “PNG is a funny place and will always have coalition governments”. Nevertheless, some greater degree of stability could be achieved, for instance by reducing the frequency of allowable no-confidence motions in parliament and by supporting political parties to maintain some degree of coherence.

 

Re-establish clear and independent roles of politics and the public service. To a large extent, this simply involves abiding by existing legal and constitutional requirements. But inappropriate practices are now so deeply ingrained that the issue is far from simple. First and foremost, strong direction is needed from Executive Government that the role of politicians is as legislated. Thereafter, administrative bodies must enforce rules, procedures and discipline, requiring compliance and not allowing or tolerating shortcuts. Whilst at first glance this may sound somewhat rigid, the increased role clarity and administrative efficiency would be expected to help instil a more positive work ethic throughout the public administration system in PNG. For instance, if people were assured of being paid, they may see some point to turning up at work. If they knew promotions were truly merit-based, they may have an incentive to perform. There is no short-term solution, because much depends on changing peoples’ attitudes and, in PNG now, the “smorgasbord of cultural, work, and political values” makes it difficult to get back to a clear focus on service delivery. The solution lies in strong leadership. Leaders must not only give clear directions, but must drive the process to ensure action follows – and they must resource the administration appropriately to ensure it can.

 

In the first instance, PNG needs to “go back to the old PSC model”. Management of the entire public service should be housed with the PSC, including appointments, transfers, dismissals, selection and performance criteria, and discipline. Departmental heads should revert to being permanent appointments, ideally with no selections referred to Cabinet for approval. If this is unrealistic, then providing a transparent shortlist of three candidates to Cabinet may be adequate. Recent changes aimed at empowering the PSC are a good step, but further reform is needed before true independence can be re-established. For instance, the PSC and DPM should be combined as one, independent constitutional office, as in the past, so that all personnel management matters can be protected from political interference. Also, the tendency for political suspension of departmental heads needs to be addressed.

 

As part of its reform program, the government is undertaking a major public service reform program with the intention of refocusing the government on its core functions and re-establishing accountable, transparent governance systems and processes. The program is still fragile and, while this government has put its weight behind it, the test will be to back it with real sustained support. Donors can play an effective supporting role in re-establishing systems and processes.

 

Put communities first. Both government and donors need to pay more attention to ensuring their programs actually mesh with local community priorities and capacity. These will vary from one community to the next, and a one-size-fits-all approach leads to “big white elephants” with unforseen ongoing costs within communities. Funding should only be provided for priorities identified in local community development plans. Programs must be tailored to local capacity, and accountability requirements must appreciate local conditions. A requirement for three quotes from local contractors for a small community project on an isolated island, for example, “is sheer madness”.

 

Seriously address decentralisation (aspirations and current flaws) in the context of affordability and responsible public expenditure management. As one interviewee pointed out, lack of resources is not the issue. PNG has enough money; it is simply not spending in the right areas. The policy may be about decentralisation, but the reality is that more and more is centralised. “Waigani has ballooned.” Similarly, the mismatch between district priorities and the priorities of the members of parliament who control development funding needs to be addressed. The solution depends on political reform as much as on financial and administrative reforms. Between 1975 and 1995, various working groups looked at the technical and administrative issues associated with decentralisation; reports were debated; and a bipartisan committee of the National Parliament was formed. Yet today, with funding tight, PNG again finds itself at a crossroad – it cannot resource provincial and local governments properly.

 

Strengthen PNG’s accountability institutions (Attorney General, Auditor General, Ombudsman, Judiciary, etc) so that they can and do “investigate and charge leaders”. These institutions are well respected in the community, having by and large withstood political pressures over the years, but they need to be supported.

 

Address and resolve fiscal problems. According to one interviewee, this first requires examining the actual performance of political leaders, the administration, and other agencies of the State (where and why performance has deteriorated, and strategies for improving it), at all levels of government. This will determine how resources are being spent, identify the real cost of services, and indicate areas that could be cut. In other words, the question of affordability should be considered after performance has been addressed.

 

Strengthen central agencies and the Central Agencies Coordinating Committee (CACC). “National coordinating agencies have become defunct.” Some are highly politicised now; others simply won’t deal with each other, and do not feel compelled to. Political control of appointment and dismissal of senior public servants has devalued incentives related to effective public administration, instead rewarding individual political profile and competition amongst central agencies for political favour. “If you coordinate, your own effect is blunted; you can’t score points with politicians as easily or as quickly. Making the choice to share power is a part of the ethics of good management and leadership”. The CACC, established during Morauta’s term, was intended as a means of reactivating the old Budget Priorities Committee, which had assured the integrity and coordination of departmental proposals. Most interviewees remain optimistic about the CACC’s potential to coordinate (or force) a shift back to responsible public administration, but they all agree that this initiative is only half working at this point in time. The CACC at present must make a separate submission to Cabinet on departmental proposals, and it has too many sector interests represented, which influence and skew budget decisions. It is also under-resourced, with little time to “ponder big issues”. Other central agencies, such as Treasury/Finance, DPM, PSC and the Auditor General’s Office also need to be resourced adequately to allow them to monitor and strengthen public sector performance agreements, strategic plans, financial management, budget planning, and so forth. Weak coordinating agencies leave line agencies exposed to direct political interference.

 

Establish a clear working relationship with donors. Interviewees feel strongly that donors continue to have an important role to play in PNG’s development, but that the ball is in PNG’s court to give donors a clear mandate on where they can help. As they see it, “donors are not there to solve our problems. They are there to help us solve our problems. If we don’t have our house in order, donors become hesitant to support us.” There is “a culture of denial” amongst some in PNG politics. They do not believe there is a problem and, in any case, do not want foreigners involved at all. All those interviewed, however, feel it is critical for PNG to “take advice from anyone, treat donors as resources, and stop denying ourselves access to advice.” They argue PNG does not have the capacity or the resources to fix the system themselves, and must accept help.

 

Reinstate a structured and targeted public service training program. Until the mid-1980s, a coherent program of training for public servants was provided by the Administrative College (ADCOL), later the Institute of Public Affairs (IPA). This coherence was lost over time, initially when IPA sought to reinvent itself as an academic institution and was opened up to offer training to the private as well as public sector (“its relevance fizzled”), and then when a user pays system was introduced and departments were given the freedom to source training from anywhere. Today, there is no institutionalised or enforced system for induction courses, middle management or senior executive training programs, or other administrative skills training requirements which must be completed prior to obtaining promotions. As a result, public servants are no longer fitted into an organisational culture from the outset, they have little or no exposure to public service ethics, and they learn in an ad hoc way as they go.

 

Efforts to revitalise the public service through training in the past have focused on the wrong things, such as scholarships and IPA infrastructure. Future support must target skills development at a working level, through on-the-job training and mentoring rather than expensive formal courses. The strategy of sending people to complete Masters degrees, for example, needs rethinking. There are many Masters degree-qualified public servants today, yet productivity, efficiency and management ability continue to decline. Even the best-qualified people cannot effect change in a system so broken. The focus now needs to be on developing strong leadership and management skills so that the system as a whole can be improved.


THE FUTURE FOCUS OF AID

Restructure donor support to focus on a few clear priorities. Australia in particular is at risk of trying to do too much, thus diluting the results it achieves.  When results are not tangible, claims of ‘boomerang aid’ can surface. According to interviewees, donors need to focus on building goodwill by delivering results. They encourage donor partners to maintain their focus on helping PNG improve governance, in particular rehabilitation of the public service, as this is fundamental to effective delivery of basic services. Interviewees argue that structural adjustment is necessary, but will only succeed if PNG itself controls the process, resources it, and manages any donor support. The volume of donor funding available to PNG in the past has meant people did not need to look within for solutions. Thus they have never had any imperative to prioritise effectively.

 

Donor assistance also needs to be restructured to focus on really rebuilding the capacity of the public service. At present, “There are pockets of brilliance but the engine is not humming.” Key precursors for achieving impact from capacity building support need to be reinstituted, notably:

 

▪ Clear definition of the roles of management; and

▪ Ensuring the whole public administration system is integrated.

 

Another commonly held view amongst interviewees is that donor programs should not be put in place on top of existing government programs. Initiatives such as the Enhanced Cooperation Program (ECP) for example, need to integrate advisers within existing systems, both psychologically and in terms of their work programs. Other consultant support too, needs rethinking. In most cases, the areas of focus are correct, but implementation approaches are ineffective. More often than not, consultants leave nothing behind, either because they have been unable to encourage local commitment to following through, or because there is no consistency in the models, plans and approaches introduced. All interviewees describe advisers from earlier years being much more closely integrated and collegiate in their approach.


VIEWS ON PNG’S OUTLOOK

All those interviewed remain positive about PNG’s prospects for effective public administration over the long term. They believe that, if PNG starts now and really focuses on the key issues, it can achieve this over one generation. “Things are happening now that can set the foundation, but it needs constant shoulders to the wheel.” In spite of its problems, they identify a number of strengths that they believe give PNG a firm foundation on which to build:

 

▪ Strength of constitutional offices;

▪ Flexibility of governments of the day to amend the constitution when necessary;

▪ Rural-based nature of the population – which assures a basic standard of living (access to basic housing, food and other necessities);

▪ Resource base for economic growth;

▪ Traditional land system – which provides people with a certain level of security even if all else fails; and

▪ A new, increasing demand from communities for performance from government.

 

Interviewees all recognise that the community’s tolerance of government’s problems (to date) has been because it can sustain itself; but impatience with the failure of service delivery is growing.

 

As they see it, attitude is the crux of the issue. PNG needs to develop confidence and a positive attitude to building a nation. It must learn to appreciate its own huge potential, embrace its ability to harness that potential, build a sense of community, and recognise the need to do things for itself. People need to think as Papua New Guineans first and foremost, respecting all others regardless of tribal group.

 

Cost-Benefit Analysis for Public Funds use in Papua New Guinea

by: Jonny Andrews

 

In government and private sector decision-making there are always competing priorities for limited funds. Many of our local Governments and sometimes the National Government tend to fund projects without doing a Cost-Benefit Analysis. The purpose of doing a CBA is to allow competing policy priorities to be compared in a consistent way, and for their economic, social and environmental impacts to be assessed.

In all areas of policy, the function of the CBA is to assist policymakers to identify the best way to deliver the strategic objectives of governments.

Government funds for investment in infrastructure and public policy initiatives are limited. These funds come at a significant cost to Papua New Guinea, through taxes collected by state entities. If governments had not collected these taxes, the funds would have been available to private individuals and businesses to spend, save or invest.

One example is in the development of our cities. Cost–benefit analysis can help to achieve the strategic aims of a holistic metropolitan plan by weighing up the economic, social and environmental impacts of different transport infrastructure options and identifying the best approach for the long term.

 

What are the essential elements?

  1. Cost–benefit analysis needs to be future looking

A good cost–benefit analysis will guide decision-making in the best interests of current and future generations by taking a long-term view those factors in economic and population growth over time.

The CBA methodology also allows for the consideration of future benefits and risks that are largely unknown or difficult to quantify.cost-risk-benefit

Governments have to pursue policy priorities where there are unknowns – because they are seen to be in the public good or because they are necessarily based on future assumptions. The CBA discipline can help policymakers to wrestle with intangibles and communicate assumptions and judgements in a transparent way.

Uncertainty about the future is no reason to avoid a CBA. In fact it makes the case for undertaking rigorous and transparent CBA even stronger.

 

  1. Cost–benefit analysis needs to be objective

Objectivity is critically important when determining the expected costs and benefits of a policy or project. CBAs (both private and public) often fail because future costs are underestimated and future benefits overstated, due to a tendency for ‘optimism bias’.

Independent assessment is a good way to build objectivity into the CBA.

Objectivity also requires that the main findings are based on a realistic ‘central case’ that depicts the most likely outcomes for costs and benefits in the future. It is then fine to test alternative outcomes under best case and worst-case scenarios.

 

  1. Cost–benefit analysis needs to consider implementation risks

Cost–benefit analysis ensures implementation risks can be identified and assessed upfront so they can be factored into a project’s implementation program. CBAs can be applied to capital projects as well as major policy and change management initiatives.

 

  1. Cost–benefit analysis needs to be easily understood so it can be subject to a degree of contestability

A CBA needs to be straightforward and readily understood by a wide range of people. The idea is not for them to be ‘black boxes’ for technicians but tools that people can use to look at priorities and contest them.

Finally; Investment decisions by governments need to be based on robust assessment of their future costs and benefits to ensure they are making the best use of taxpayers’ funds and deriving the maximum benefits for society.

CBA is one of the key tools that can assist in the development of evidenced-based policy if it is conducted with transparency and objectivity. It provides a framework for weighing up different impacts

 

PNG Sovereign Wealth Fund – O’Neill Legacy

by Julia Daniel

Throughout the course of Papua New Guinea’s Independence until today, Papua New Guinea has had its share of resource revenue. The Bougainville Copper Mine had generated millions if not billions of revenue for the National Government. The Misima Gold Mine, Porgera Gold Mine, Tolokuma Gold Mine, Lihir Gold Mine have all poured their resources in the Government. In additional to that, PNG was blessed with Copra, Coffee and Cocoa which it had exported.

However, the past leaders of Papua New Guinea had failed the country. They all have succumbed to the “Dutch disease” and have not prepared the country for a rainy day.

In February 2012, Peter O’Neill having learnt from all the observations as Finance Minister in the Somare Government, passed a Law for PNG to established its first ever “Sovereign Wealth Fund”

What is a “Sovereign Wealth Fund?”

According to Wikipedia “A sovereign wealth fund (SWF) is a state-owned investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank.

Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation’s banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and thapng-swft may not have a significant role in fiscal management.”

The Papua New Guinea Sovereign Wealth Fund (PNG SWF) will consist of a number of Sovereign Funds. The Legal ownership of the sovereign wealth fund is the Independent State of Papua New Guinea.

The objectives of the fund are to support the long-term social and economic development objectives of the State provide a means of saving for the future generations and facilitate the macroeconomic stabilization of the Papua New Guinea budget and the economy.

The Sovereign Wealth funds currently have two parts;

  1. Stabilization Fund
  2. Savings Fund

National Research Institute (NRI) after conducting a research into this Law gave its support of the establishment of the PNG SWF and further recommends that the Sovereign Wealth Fund also include an “Infrastructure Development Fund” in addition to the 2 funds.

The Revenue Flows for the PNG SWF will begin in the first quarter of 2017 according the Treasury Minister Hon. Patrick Pruaitch who gave a budget speech in August 2016. “Mr. Speaker, I am pleased to confirm that revenue will start to flow to PNG’s Sovereign Wealth Fund in the first quarter of next year. In 2016, revenues flowing into the Stabilization Fund will be drawn down into the Budget to fund key priority policy areas.

This landmark legislation was passed in July. I thank all members for their bipartisan support of the PNG Sovereign Wealth Fund. Designed as a long-term investment vehicle, the Sovereign Wealth Fund will serve PNG for decades to come, reducing PNG’s vulnerability to external shocks, such as the current fall in commodity prices.

The Sovereign Wealth Fund has been designed to provide the highest standards of accountability and good governance. Funding has been allocated in 2016 for appointment of an experienced and well-qualified Board and a SWF Secretariat. In 2016, the Government will issue the Board with its investment mandate and Government expectations on management of funds.” – Patrick Pruaitch

Papua New Guinea will really start to reap the benefits of the PNG SWF once revenues start to flow into the funds.
The onus now is for the Government to setup a transparent and stable management of the fund without political interference.

 

  1. http://www.businessadvantagepng.com/papua-new-guinea-sovereign-wealth-fund-coming-in-a-nick-of-time/
  2. http://pacificpolicy.org/2014/09/pngs-sovereign-wealth-fund-still-too-many-loose-ends/
  3. http://www.swfinstitute.org/swfs/papua-new-guinea-swf/
  4. https://www.google.com.pg/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjxkLqV9vvOAhVBmZQKHeJADgwQFggfMAE&url=http%3A%2F%2Fwww.treasury.gov.pg%2Fhtml%2Fpublic_debt%2Ffiles%2F2013%2Fswf%2Fpng.swf_public.info_%252022%2520Feb%25202013.pdf&usg=AFQjCNF7Sgy9WSOJn-hL21xrClS02KITJg&bvm=bv.131783435,d.dGo

 

 

Economy on the Right Track

Mr Speaker so as a result of that when we came into government in 2012, we changed the strategy. And that was to get into a deliberate deficit budget. And the good treasurer then was the current opposition leader. When we introduced the budget, we that projected a deficit of 6 per cent, 6 per cent at that time in 2012. We came under when we had the final year outcomes, Mr Speaker we came under almost 5.9 percent. In 2013 we came under 5. 2014, 2015 we came under 4. We ended up with 3.9 percent.

This year this budget and these supplementary adjustments are trying to make sure that we continue that decline all the way down but in a structured manner Mr Speaker. So the outcome that we are projecting for 2016 is under 3 percent deficit for our economy. And next year in 2017, we hope to bring the budget deficit down to 2 percent and eventually we’ll get down to a balanced budget. ” – Prime Minister Peter O’Neill

large-image-budget.jpg

To Save or NOT to save?

Mr Speaker we are quite familiar with the strategies that we have put in place and let us say that when we took government in 2002, the idea and the strategy was to get back to surplus quickly and credit to the good honourable treasurer then. He ran a very t6686236-3x2-340x227.jpgight ship. And as a result we produced so many surplus budgets. We had surpluses for many many years Mr Speaker. But at the expense of what? We had a surplus budget at the expense of cutting services everywhere. We eventually shut down departments that were not function
ing. We had provinces that were not operating. We had districts that had never seen their government. Yes we were having surplus budgets. Internationally we were looking good. The budget figures were excellent. But the reality on the ground was absent
.” – Prime Minister Peter O’Neill

 

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2016 SUPPLEMENTARY BUDGET SPEECH by Hon. Peter O’Neill, PM

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AUGUST 26 2016

 

These are processes that have been ongoing for 40 years since our independence. The government does not go and consult the opposition about budgets, unlike what the good opposition leader is trying to say. Budgets are key important policy documents for governments and as a result of that Mr Speaker it certainly does have a bit of secrecy about it because you don’t want to argue about the economic position of the country on gossip columns and the press on a daily basis. Mr Speaker it does not give confidence to anyone. What it states basically is that what you present to parliament must be taken seriously and that the business community and the investors and all the other stakeholders will have confidence. Mr Speaker coming to this parliament in 2002 under the Somare government, we inherited an economy that was in fact projected to be in surplus by the previous government. We inherited a government that was having a minus K800 million deficit. The strategy at that time was to try and return to a surplus budget as quickly as possible. So the good honourable treasurer, Mr Bart Philemon and Mr Speaker let me say that in the last 15 years there has only been four treasurers in our country. Fortunately three of us are still in this parliament and our good treasurer is the longest serving treasurer among all of us. Myself and the opposition leader are the shortest serving treasurers in between, so Mr Speaker we are quite familiar with the strategies that we have put in place and let us say that when we took government in 2002, the idea and the strategy was to get back to surplus quickly and credit to the good honourable treasurer then. He ran a very tight ship. And as a result we produced so many surplus budgets. We had surpluses for many many years Mr Speaker. But at the expense of what? We had a surplus budget at the expense of cutting services everywhere. We eventually shut down departments that were not functioning. We had provinces that were not operating. We had districts that had never seen their government. Yes we were having surplus budgets. Internationally we were looking good. The budget figures were excellent. But the reality on the ground was absent.  That is the fact Mr Speaker. Mr Speaker so as a result of that when we came into government in 2012, we changed the strategy. And that was to get into a deliberate deficit budget. And the good treasurer then was the current opposition leader. When we introduced the budget, we that projected a deficit of 6 per cent, 6 per cent at that time in 2012. We came under when we had the final year outcomes, Mr Speaker we came under almost 5.9 percent. In 2013 we came under 5. 2014, 2015 we came under 4. We ended up with 3.9 percent.

This year this budget and these supplementary adjustments are trying to make sure that we continue that decline all the way down but in a structured manner Mr Speaker. So the outcome that we are projecting for 2016 is under 3 percent deficit for our economy. And next year in 2017, we hope to bring the budget deficit down to 2 percent and eventually we’ll get down to a balanced budget.

Mr Speaker we are doing it in a structured manner and avoid cutting services.  Our key policies and our key promises to our people remain same. We have not cut free education, we have not cut free health care, we have not cut the support that we are going to give to the churches and all our partners. We are continuing to invest in capital works and infrastructure throughout the country. We’re still maintaining good support for the judiciary and in the law and order sector Mr Speaker. 

We are supporting the districts through the DSIP without any cut. Through the PSIP, all those key programs across the country Mr Speaker it is being maintained and are producing results today. Four years of steady results with a declining deficit budget that is coming down, we need to continue to stay focused. We need to stay on track Mr Speaker. I guarantee you that we will get down to a balanced budget. And this will give confidence to even our international partners who now understand. It is a strategy that the Opposition leader himself was party to. However, all of a sudden there is fear about debt about budget deficits Mr Speaker.

Mr Speaker, even United States of America, the most powerful nation in the world, Japan is 3rd most biggest economy in the world, Australia, Britain, and most of the countries around the world are in deficit budgets Mr Speaker even though they have advanced infrastructure, better roads, better hospitals, better schools, unlike us; they are running a deficit budget because they need to stimulate their economy. Mr Speaker, if we do not invest in infrastructure after the LNG construction has lapsed, we will see more people on the unemployment line than what the member for Goroka is saying today. The construction investments that we have made in the construction industry throughout the country are keeping people employed. It is keeping as a means of functioning Mr Speaker. Yes there are tough times there.  There are some businesses who are struggling. And that is admitted Mr Speaker, but Mr Speaker the global challenges are not new to us, we don’t have to have a political grand standing. It’s not a contest of who is the brightest and who is the smartest. Mr Speaker it is about making our country work and putting food on the table for our people.  And that is the priority of this government Mr Speaker.  

Mr Speaker, let me say that the growth projections that the treasurer is now saying just close to global growth projections that has been stated by IMF and the World Bank, Mr Speaker that is extra conservatives that the treasurer has made. I know that we will finish higher than that at the end of the year Mr Speaker. We will finish higher than that. Last year Mr Speaker it was projected to be around 6 percent or so, we finished at 9.9. These are independently verified figures of the economic growth for the country. So Mr Speaker, you can see that our economy is transforming since 2011-12. Our GDP for the entire country has doubled. We must continue to maintain prudent management of our economy and offcourse that is not an evil thing Mr Speaker. Many successful countries, many successful companies go into debt to grow their businesses, grow their economies and likewise we must follow. The strategy for Lae MP Bart Philemon used was that all the surpluses that we made in 2002 onwards were diverted into paying back all the debts, which looked very good. The debt levels were coming down but we were not investing in infrastructure. Lae city was in potholes, Port Moresby city was breaking down; even all our provinces were not functioning as expected. That is a fact. I know that now there’s a little bit of improvement in many of these services within the provinces. 

Yet we tend to forget 4 or 5 years ago where we were. The fact is because we are investing in the right sectors and things are starting to look promising. We need to continue to maintain that level of activity. 

Mr Speaker one other thing is that it is quite evident that when we set budgets, it is the educated  professionals and experts working within treasury and the country who set this forecast for us. They make assumptions about commodity prices. For example, when we were experiencing 110 dollars per barrel for the oil prices in the budget figures, they estimated 70 or 80 dollars per barrel. They reduced it down to an acceptable level so our country could counter for any shocks on the drops of prices. And offcourse if the prices remained high, we were able to raise more revenue. But Mr Speaker when you have an economy that collapses from 110 dollars price down to 27 per barrel that’s a huge drop in anybody’s language. And obviously the revenue coming into the country gets affected. That is why our revenue for this year is down by almost 2 billion dollars, which we used to get from mining and petroleum taxes almost that accounts to about K2 billion a year for PNG. This year we will be lucky if we get K200 million. That is a huge drop. I know there are many fortune tellers around but you know nobody tells that what the global prices will do over time, or when the war will be declared in the Middle East somewhere, nobody knows. You and I have no control over that. We are price takers so we have to live within reality Mr Speaker. And the fact of the matter is Mr Speaker supplementary budgets are a necessary tool for us to adjust our budget. I know there has been calls, many experts, and so called experts who sit behind computers around the country and give their expert advise and critic on supplementary budgets or readjustments to 3 or 4 months after we have introduced it. The truth is that you have to allow the activity in the economy to continue so you have a reasonable assumption. You can’t change your budget everyday or when the price of oil drops. You have a long-term average that is why after the mid-year economic physical outcomes were produced by law, it was published publically by treasury in June. We are able to assess our economy’s tracking. There is no other way to assess how anyone can predict where the economy is going unless you have the figures to tell you how the economy is performing. After that the outcome we have been able to see it. I know the good member for Goroka has got a copy of it he can pass on one to the good opposition leader but you know these are public information that is available out there. Every international donor agency, every multilateral partner have access to it. Mr Speaker, based on that, the treasurer is able to frame the supplementary budget. And that is what we are discussing today. It is painful because we are cutting some basic service, basic expenditure items that are going to cut costs, limits of activities for some of our national departments. But we tried our very best Mr Speaker to maintain no cuts in the districts, no cuts to the provinces, no cuts to education, free education policy, free health policy, no cuts to the infrastructure and I know that the good opposition leader talks about cuts to the worst. Mr Speaker after discussions with the department of works, the management there, they are saying that these are some of the projects that are budgeted for this year but will not start yet until next year. Mr Speaker, ADB and offcourse all the other donor partners are working closely. Some of these ADB funded projects will continue. It’s not as if we are saying that the economy is not ferrying well so we shut down shop and go on holiday. The economy is still functioning, it’s still standing. Mr Speaker we have got mines that are now starting to produce well. Offcourse mining projects like Lihir and Porgera and because of physical terms that were given to them, we didn’t collect much in our revenue for many years. Only now they are starting to pay taxes. Mr Speaker, we will start seeing some increase in the revenue that we will get from companies like Ok Tedi who will start paying dividends because it is now operating very profitable.  Finally, Mr Speaker there has been a lot of talk about inflation. Prices of goods are going up. Mr Speaker, again the international economy functions itself on US dollar as the primary currency. Over the last 2 years, the US dollar has been gaining strength against all currencies. We are not exempted from that. That means the real value of kina is continuously going down. And when it goes down, offcourse the import costs go up and as a result it is passed onto the consumers. That is why we are trying all our best to make sure that we buy Papua New Guinea made products only Mr Speaker. So that we can promote Papua New Guinea industries. We can promote agriculture in PNG. Mr Speaker these are areas that we want to focus on because our problem in the past is that we have not learnt from the mistakes made previously. That is that why we have not broadened our economy. We have been overly dependent on mining and petroleum Mr Speaker so as a result when the boom and bust cycle goes, we ride with that boom and bust cycle. Going up and down, up and down. So it is very important that we broaden the economic base. And I think the new reports that are coming out from National Statistical Office; the new GDP data that the Minister for Planning shows that these sectors are slowly starting to carry the economy. 

It means that we are not overly dependent on the mining and petroleum sector and I think that when we continue to invest in these industries, we will do our best despite limited resources.

You know Mr Speaker, most important is free education. The school fee savings is what the parents will have in their pockets. It is savings them. That is an increase to their household income Mr Speaker. When you have funds going to the districts and the PSIP and DSIP, they are spending money in the districts. we also have K10 million in the districts, K10 or K15 million in the provinces. Mr Speaker, what are DSIPs and PSIPs employing? 

They are employing local businesses or small to medium enterprises to carry out government work in the districts. Mr Speaker, so money has been translated into key sectors that are starting to produce results. We must continue to stay on the key policies we agreed to until the elections Mr Speaker. 

Let the people judge us on the outcomes and I commend the treasurer for presenting an excellent supplementary budget.

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.