| Politics: 31 YEARS OF INDEPENDENCE |
Where is PNG heading?
Rowan Callick
Papua New Guinea is entering uncharted—but mostly calm—waters as it prepares itself for its seventh national election.
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Sir Michael Somare... first to survive an entire five-year parliament.
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The government led by Sir Michael Somare is heading to be the first to survive an entire five-year parliament.
The economy is in increasingly sound shape—at least at the macro level—and the signs are promising that the government will not indulge in the usual big spend-up in the months leading up to an election.
And the election, due in June next year, will be the first under a new preferential voting system rather than first-past-the-post.
This will place a premium not on attacking opponents but on building alliances with them, so that their supporters’ preferences will shift to you at the next round of counting.
Even the biggest black spot—the oil—and—gas-rich Texas of PNG, the Southern Highlands, which imploded in anarchic warfare at the last election, with utes converted into armoured cars for warlord style candidates —is being brought back under direct control by Port Moresby.
The economic question that still looms largest is whether the long discussed gas pipeline from the Southern Highlands across the Coral Sea and down the Queensland coast to Brisbane—now expected to cost about A$5000 million—will be built.
It offers PNG its best platform yet for long term growth. But a recent massive blow-out in the cost of the Australian section of the pipeline, as a result of a serious shortage of skilled labour, and of the China-driven rise in the costs of most basic materials, has led to a crucial customer, AGL, re-thinking its involvement.
The odds remain in favour of the project going ahead, but the owner of most of the gas, Oil Search Ltd, says it has sound alternatives which involve adding more value inside PNG. The Australian market remains, however, the best hope for the stable and profitable exploitation of PNG’s big gas reserves, and Oil Search in late September said the cost could be cut by adopting a shorter route.
Petroleum and Gas Minister Sir Moi Avei remains optimistic and has pursued the project with a persistence and focus probably unrivalled in PNG’s political story so far.
This story began with Somare, of course, the founding prime minister. And it appears set to continue the same way.
No one seems yet to have emerged with a compelling case, in the broad public perception, to replace him.
And while every former prime minister except the late Sir Bill Skate is preparing to enter the election campaign, none commands the extent of the party support—at this stage—of Somare’s National Alliance.
One of those former prime ministers, Sir Rabbie Namaliu, has recently been shifted from Foreign Minister to Treasurer—a role in which he handed down, on August 1, a mini budget.
This has become something of a tradition in PNG, one which enables those concerned about sound policies to ensure cabinets do not waste windfalls from increased tax and aid receipts that have accumulated since January, before the full Budget can be brought down in early November.
In his speech introducing this year’s mini budget, Namaliu—now the undisputed leader of the Pangu Party that Somare founded—said economic growth had reached 3.7 percent, faster than the 3.5 percent projected in the budget, chiefly because of higher prices for PNG’s main mineral and petroleum exports.
The prospects that such revenues are sustainable are being boosted by the increase in mining exploration—with 25 new licences being lodged by July, compared with 26 for the whole of 2005.
Namaliu forecasts that the pace of economic growth would increase again in 2007 to four percent—still not significantly above the country’s 2.7 percent population growth, but starting to allow some real progress in development again. This is the fifth consecutive year in which economic growth has outpaced population growth.
Formal employment outside mining rose 8.1 percent in the year to March 31—although Namaliu conceded “we still have a relatively low proportion of the population in formal employment.”
Inflation—at 1.7 percent—and interest rates are at historically low levels, providing a big incentive for private investment.
The kina has stayed stable, appreciating in the first half of this year by 1.1 percent against the American dollars to 32.6 US cents, and by 3.7 percent against the Australian dollars to 43.86 Australian cents. And foreign exchange reserves exceeded US$1 billion at the half way mark, June 30, “sufficient to comfortably perform their role of appropriately managing short-term exchange rate volatility.”
Crucially, the government’s disciplined economic management—driven heroically until recently by Namaliu’s predecessor Bart Philemon—has enabled substantial amounts of public debt to be repaid, thus allowing more revenue to be used not for paying off interest on such debts, but on development.
At its peak at the end of 2002, said Namaliu, public debt comprised 72 percent of the country’s gross domestic product. On March 31 this year, it had been brought down to 50 percent of GDP—though he warned that such debt “is still at a high level.”
A major test of whether this sense of responsibility will persist through the temptations and trials of a PNG election year, will come in his full budget for 2007, when the central bank will be looking for the government to keep cutting debt.
Among the immediate rewards of such discipline, for the minority of Papua New Guineans who pay income tax, is that the top rate fell from 47 percent to 45 percent this year—and will fall again to 42 percent, handily, in election year.
Namaliu also announced on August 1 that the budget was slightly in surplus in 2005 by 0.1 per cent of GDP.
He said the tax take for 2006 is expected to be 637 million kina above the budgeted figure, and the non-tax revenue will be up 135 million kina, chiefly from extra earnings from the state’s ownership in the Ok Tedi copper mine.
Instead of using this money to repay debt, however, virtually all of it is being spent, as Namaliu put it, “on those areas where many years of neglect have seen some of our essential economic and social infrastructure become rundown and no longer operate.”
This enables PNG’s previously unfunded Medium Term Development Strategy to be put into action, and 60 percent of the new spending goes on transport, health and law and order—which will keep the MPs happy too. Their more direct interests are served by an extra K3.7 million being used to replenish the MPs’ retirement benefits fund.
Namaliu—who will contend at the election, but is unlikely to prise the top job from Somare—assured the International Monetary Fund and World Bank at their joint annual meeting in Singapore in late September, that “we are not complacent” despite PNG’s recent economic revival, a real sign that times have changed.
Of the other former prime ministers, Paias Wingti is also likely to stand again. But his political fortunes have been waning—perhaps partly as a result of his acquiring such a substantial economic fortune that some of his once driving ambition has softened.
Strangely, no other Highlander has really imposed himself on the political landscape since his emergence—though Bire Kimisopa has made a big impression as Police Minister, recently shifted to Justice Minister, in his first term in parliament, as a calm, sane, enthusiastic influence.
Peter O’Neill, from the Southern Highlands, is opposition leader, and has provided a largely responsible and coherent critique of government policy and practice, but has so far failed to convince that he is set to topple Somare.
Former prime minister Sir Julius Chan, whose son Byron is an MP, intends also to contest the election, for the regional New Ireland seat, for the People’s Progress Party he founded.
And former prime minister Sir Mekere Morauta, whose People’s Democratic Movement remains part of the governing coalition, has chosen not to take a ministry, and is positioning himself as perhaps the leading candidate, again, to take on Somare.
He is likely to work in alliance with Bart Philemon, who—like most of Somare’s many other “chosen successors”—finally gave up that hope and left to form his own party in time for the election.
Ultimately, most observers believe Somare will only stand aside for someone from within his own family, probably his son Arthur, currently Minister for State Enterprises, Communications and Information.
Somare acted decisively to declare and then extend a state of emergency in the Southern Highlands, the source of crucial oil and gas revenues, with only the sidelined governor, Hami Yawari, in opposition. O’Neill, a Southern Highlands MP, backed the government on this. The aim appears to be, to ensure that by the next election in 2007, this province is calm and ready to vote peacefully rather than become the victim of battles between warlord-politicians.
And there is more good news. Bougainville remains largely peaceful—although it is failing to attract the investment it needs in order to secure jobs and development that will guarantee it will stay that way.
The leaders of the largely autonomous province are still working through the challenging issues involved, before deciding finally whether to open the doors to mining—or to exploration—again.
The Chinese government, which is anxious to secure reliable access to the resources it needs to maintain its own blistering economic growth, is finalising plans for the development of its Ramu nickel mine in the Madang province.
Controversies will inevitably emerge, as lessons are learned on all sides—not least over the numbers of Chinese who will be coming to work there. The totals being tossed around range from 300 to an extraordinary 2500.
And W R Carpenters Group, one of the oldest conglomerates in the Pacific, has announced it will spend up to K200 million to expand over the next three years its operations in PNG—where it runs plantations in the Highlands and has recently bought out the country’s leading computer and internet company, Daltron, from founder Bruce Dahlenburg.
There’s still a long way to go before PNG meets its early expectations.
But overall, as a nation, it appears to be edging back on track.
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