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One country, two different stories
The Somare Government may have achieved economic stability at the macroeconomic level but ‘failed’ to achieve at the micro-level in its five years in office, says an Australian academic.
Achieving at the micro level would have complimented the achievements made at the macro level to foster investment and economic growth.
Executive Director of Pacific Institute of Advanced Studies, Professor Rod Duncan told the PNG Economic Update seminar at the University of Papua New Guinea that from the macroeconomic perspective, the government has brought a level of stability to the PNG economy in terms of eliminating budget deficits, reduction in inflation, reduced public debt, and improved economic management.
In providing a comparative analysis of achievements at the macro and micro levels, he said that macroeconomic management has seen improvements but lack of progress on the institutional problems facing PNG at the microeconomic level is a concern.
High levels of corruption and law and order problems not addressed at the micro level would mean that future foreign and domestic investment will be concentrated in the resources sector only and would be of little value to many Papua New Guineans.
He said PNG needs fiscal discipline to achieve at the micro level. “If you consider only the macro story, the PNG economy appears to be on the right track and future prospects are bright.
“However, the micro story reveals an entirely different reality and set of prospects...the rosy outlook presented in the 2007 budget is not the correct one. The micro story indicates troubling prospects for the country,” said Duncan.
These findings were the result of an economic survey that examined in broad terms the Somare Government’s economic achievements and failures, the upcoming election and peoples’ expectations.
He said at the macro level the economy appears to have settled into a low inflation state and the government budgetary and debt problems inherited from previous governments have been reduced, while the national budget has been in surplus in recent years due to increased revenues and restricted spending growth.
Public debt was reduced from a total of K8,366.3 million in 2002 to K7,341.0 million in 2006 and is expected to remain relatively constant over the same period. This prompted the international banking community to award a small improvement in the credit rating of PNG.
The government also shifted the composition of public debt in that the level of public debt held in instruments such as Treasury Bills and inscribed stocks rose from K2588.3 million in 2002 to K3670.4 million in 2006. The amount of public debt held by international agencies and in commercial loans has been reduced at the same time.
On the micro front, Duncan said the government has made no progress and most importantly, the success in the macro area may not be sufficient to compensate the failures in the micro areas.
Significantly at the micro level, the government has failed to address urban unemployment which is one of the main problems in PNG. The urban unemployment rate of 16.2 percent listed by the National Statistical Office in 2000 may be a huge under-assessment due to confusion in the three employment categories (employed, self-employed and unemployed). A large human resource is unused.
Development of the private sector would potentially absorb the unemployed population but investors (domestic and foreign) find the investment climate not conducive. This is another failure at the micro level. Investors are hindered by problems relating to crime and theft; corruption; poor infrastructure, policy instability, inflation and tax levies and regulation.
These factors raise the cost of doing business in PNG and an investor will have to provide security to prevent crime and theft, pay off government officials and maintain independent infrastructure.
—By Brian Tobia
Land worry
Niueans who’ve stayed away from the Rock of Polynesia for a long time may find themselves without land. Radio New Zealand International reported the Niue Government was looking at ways of changing its land titling process. Niue’s premier, Young Vivian said Niueans living overseas may forgo their land if they stay away too long and do not title it.
Economy continues to decline
Fiji’s Reserve Bank (RBF) has once again warned of the continuing decline of the Fiji economy, urging adequate and lasting solutions to the problems and cautioning that “tinkering at the margin will not work for us any longer,” RBF governor Savenaca Narube said. He highlighted the economic challenges Fiji was facing, stressing that “solutions that will last are not without costs. There will always be a cost to correcting economic imbalances anywhere particularly of the magnitude that Fiji is facing.” He reiterated Fiji’s key economic challenge which is its widening trade imbalance.
Govt after NZ$350,000 debt
The government is struggling to recoup NZ$350,000 (US$258,000) owed by a group of so-called investors—a situation that New Zealand National Party MP John Hayes says should never have arisen. Niue is largely dependent on aid—it got $14 million (US$10 million) from NZAID this financial year, half of which was budget support. It has been criticised for how it manages its finances. Now the government is under fire again over debts at a hotel it half owns. A group of people came to Niue some time ago promising to spend big money investing in health spas.
Tribunal awards US$1 billion
A group of Marshall Islanders exposed to high-level nuclear test fallout may not be able to get a cent of their more US$1 billion compensation awarded by a special tribunal. The Marshall Islands-based Nuclear Claims Tribunal, which issued the ruling, has virtually no funding to pay the award. The billion dollar ruling comes more than 15 years after the claim was first filed by leaders from Rongelap, a low-lying atoll that was blanketed by nuclear fallout from the 1954 Bravo hydrogen bomb test at Bikini.
US wants explanation
The Marshalls has been rapped over the knuckles after it temporarily borrowed half a million dollars from its compact funds to pay for a shipment of fuel to keep Majuro alight, the Marianas Variety reported. The Interior Department issued a letter warning the Marshall Islands that the US was fully aware of the improper action by its finance ministry. But it did not suspend regular payments to the Marshall Islands as it has done in Chuuk and Kosrae, two of the four states in neighbouring Federated States of Micronesia whose funding from the US is also governed by a Compact of Free Association with strict accountability requirements.
Cut budget or face crisis
Tonga’s finance ministry has asked portfolio ministers in the island kingdom to cut back budget requests to protect the economy from a crisis. Finance minister Siosiua ‘Utoikamanu said his department has received around US$82 million in budgetary requests, but said only US$72 million has been allocated for the next financial year. He said Tonga faces a potential fiscal crisis after riots in November last year destroyed much of the capital’s business district and shook investor confidence.
Demo campaigner warns of violence
A democracy campaigner in Tonga has again warned his country could erupt in violence as the government extended a state of emergency for a fifth month. ‘Akilisi Pohiva, chairman of the People’s Committee for Political Reform and a member of the Tongan parliament, told an Australian newspaper that people in the tiny South Pacific nation were frustrated by curbs on their freedom under the emergency declaration. “If the government continues to extend the emergency laws without any good reason, my feeling is that the people will eventually get angry and then their anger might get out of hand,” Pohiva said.
CNMI cracks down on child trafficking
The Northern Marianas’ immigration division has tightened up on requirements regarding minors travelling to the country. It now requires additional documentation to be presented before a visitor’s entry permit can be issued for a minor travelling to the island nation with an adult who is not the minor’s parents. Immigration director Melvin Grey told Marianas Variety this was a “pro-active” approach to deter child trafficking and other problems that may
be associated with minors entering the Northern Marianas.
Palau far from economic independence
Palau is still far from the “ultimate goal of achieving economic independence,” President Tommy Remengesau said in his State of the Republic address in the island nation. He said that congress must put in place frameworks for economic growth, develop the private sector and expand revenues and to transfer employment from the public sector to the private sector.
Tuna industry killed?
The removal of duty-free access for the African Caribbean Pacific (ACP) countries to the European Union (EU) market will have dire consequences for PNG’s tuna processing industry which is in its infancy, Post Courier reported. The warning comes from two of the country’s tuna processing operations as negotiations intensify between the EU and ACP member countries, including PNG, for new arrangements to replace the present one which allows for free access to the EU market for exports from member countries. “If the duty-free access of PNG to EU is removed, it will not only stop any future investment on tuna processing on shore, but will also mean the gradual death of the current tuna processors in PNG,” said president of Lae-based Frabelle PNG Limited, Augusto Natividad.
Australian PM ends Pacific neglect
Australian Prime Minister John Howard says he has ended Australia’s policy of benign neglect towards the South Pacific, according to Radio Australia. Howard was speaking in Brisbane in the first of a series of speeches on issues confronting Australia ahead of national elections expected in November. He said in the coming two decades, Australia’s defence forces must be combat-ready to ensure stability in the neighbouring region. “We will continue to carry a heavy burden for order and stability in this part of the world,” he said “Indeed, one of the most far reaching national security decisions this government has taken was to end a posture of benign neglect in the Pacific. There will be no going back from that commitment,” he said.
Corruption threatens values
Corruption undermines democracy, development and good governance in the Commonwealth, Commonwealth Secretary-General Don McKinnon says. McKinnon told a conference that every year an estimated US$400 billion is lost worldwide in government procurement, undermining the potential effects of a government’s capital spending as money is taken out of poor peoples’ lives and into rich peoples’ pockets.
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