PNG: 33 years of Independence

Rowan Callick

Port Moresby... capital of Papua New Guinea.

As Papua New Guinea enters on September 16 its 33rd year as a sovereign nation, its economy is growing strongly, but as so often its politics is starting to look less steady.

The return of Sir Michael Somare, “the Chief,” to power half a dozen years ago did much to stabilise PNG’s often fractious politics—though the structural changes resulting from legislation introduced by his predecessor Sir Mekere Morauta played a crucial part in enabling the Chief to stay unchallenged for so long.

Somare has had health problems, and is now 73. It is hard to imagine him standing again at the next election in 2012, when he would be 77.

Throughout his extraordinary, illustrious career he has spoken of standing down in favour of a chosen successor.

But like so many other politicians in every country in the world, and of every colour of politics, he has found this easier to say than to do.

In the 1980s, one member of his party, then Pangu, after another would feel that he had been given the crucial blessing of the “father of the nation”—only to find that after he had exposed publicly his ambition to become leader, Sir Michael would then withdraw his support.

Usually, these disappointed successors would then leave Pangu to found their own parties. Paias Wingti and the late Sir Anthony Siaguru are examples.

In such cases, the keys stayed firmly in the grip of the country’s most enduringly popular and successful politician, Sir Michael.

But now, time and age have entered the arena as a powerful external factor. Those keys are no longer so firmly in the Chief’s grasp. But of course even if he does face at some stage the inevitability of departing the top job, he would wish to retain the power to control the succession.

It is possible that in the coming months he may face a prosecution under the leadership code, by the Ombudsman. This would be a grim confrontation, and the Chief would probably be required to stand down during the months that it would take for such a prosecution to be completed—one way or another.

The identity of the acting prime minister he would appoint in such a circumstance, would provide a crucial pointer to the longer term succession.

The logical candidates include his son Arthur, Minister for State Enterprises; the controversial Treasurer and former Forests Minister Patrick Pruaitch; the deputy Prime Minister Puka Temu, a medical doctor; and possibly also Transport Minister and leader of the powerful Highlands faction in the ruling National Alliance party, Don Polye.

The constitutional 18-month grace period following an election, during which no confidence motions cannot be entertained in the parliament, expires in February. The opposition is at present small in numbers, weak and fragmented, so the government is not at any real risk. Yet. But a bitter battle within the government over the succession, could do much to invigorate the opposition.

ECONOMY

While the economy has been growing especially strongly this year—with gross domestic product expected to increase by more than seven percent, the sort of rate it needs to sustain in order to attract investment and provide jobs for the massive pool of unemployed young people.

But Wilson Kamit, the veteran governor of the PNG central bank, recently warned that inflation could hit nine percent this year, relentlessly swamping the positive impact of strong growth. In its mid-year fiscal review, his bank was even more gloomy, estimating it might go as high as 11.5 percent.

This would of course at a stroke undo all the good work of getting growth up to such a comparatively good speed. So the central bank is introducing measures to try to curb inflation—for instance, increasing interest rates by 0.5 percent so far in 2008.

Kamit, in a speech to the annual Waigani Seminar in Port Moresby on August 14, said that driven largely by high international prices for the commodities PNG produces—not only gold, copper and oil but also palm oil, coffee and cocoa—the period 2003-2007 had been one within PNG of price stability or low inflation, leading to rapidly increased international reserves, low interest rates, and a steady exchange rate for the kina.

He said: “Our independence (as a central bank, following legislative reforms introduced in 2000) allowed us to clean up the financial sector.”

The central bank found it necessary in 2000 to “replace the board and management of the troubled government-owned PNG Banking Corporation,” which was then “revamped and successfully sold off under the government’s privatisation programme in 2002”—a programme effectively halted under the Somare government, however.

During its financial “clean-up process” the bank, said Kamit, “shut down 86 dormant savings and loan societies, placed other financial institutions under management with a view to enabling them to trade themselves back into business and liquidated a number that had been mismanaged and were beyond rescue.”

RESOURCE SECTOR

As usual in PNG, its resource sector is continuing to prove its strongest.

The US$1 billion Ramu nickel mine being built at a rapid pace by China’s Metallurgical Construction Corporation, which had some typical teething problems as a result of placing insufficient emphasis on building relationships within the necessary wide group of PNG communities—but now appears to be learning rapidly and moving ahead more smoothly towards production.

Porgera continues to be a top performing gold mine. But the Ok Tedi copper mine will close down in about five years—leaving a big hole in revenues the government hopes Ramu may fill.

The biggest of all PNG’s resource projects is now on the drawing boards, however: gas commercialisation. The country has huge reserves of gas—but it is very, very expensive to get the gas to the major markets. The long mooted pipeline to Australia finally fell apart, and the new plan is for a liquefied natural gas plant and other downstream processing works.

The partners in the project, which may gain final approval next year, are Oil Search, Exxon-Mobil, Santos and Nippon Oil, as well as the PNG government.

The capital cost would reach US$12 billion, which would mostly be spent during the four-year core construction process, requiring about 7000 workers for that stage.

This would be competing with new LNG projects in Australia, but would not have to meet the tough new emission requirements there following Canberra’s accession to the Kyoto Treaty.

The new project is claimed to have the potential to double PNG’s total gross domestic product and underpin state revenues for the next generation.

CONTINUING CHALLENGES

The continuing challenges for PNG, as the country looks ahead on Independence Day on September 16, include the shocking infrastructure. Roads have deteriorated in many regions. Telecommunications has fallen behind its Pacific neighbours.

Public service efficiency is poor. HIV/AIDS remains a massive health and social problem.

School enrolments and adult literacy are well below regional averages. And the number of hospital beds per 1000 people is half what it was in 1980, while the spending on health (US$34 per person per year) is the lowest of any Pacific island country.

A report by the Centre for Independent Studies in Sydney estimates that PNG has about 1.5 million unemployed or underemployed men, with 75,000 per year joining that total.

This indicates that PNG’s economic growth remains even at seven percent—well below what is necessary to make any real social progress.

Corruption also remains a chronic concern, apparently endemic at the bureaucratic level. The finance department is undertaking a major inquiry—though PNG has seen many inquiries before that have appeared to have little longer term effect.

At the political level, there have been serious allegations of a US$42 million secret fund held in Singapore by one or more MPs, to which the proceeds of log exports have been channelled over the last six years.

This is naturally feeding in to the bitter brawl getting under way for the succession to Sir Michael.

And the deployment of US$30 billion by the previous government in Taiwan to win PNG’s diplomatic loyalty—which led to the resignation of three ministers there and almost certainly criminal charges to come—is also continuing to reverberate.

This makes all the more tragic, the sudden death in Rabaul in late August of Mike Manning, who was the crusading president of the PNG chapter of Transparency International.

PNG/AUST RELATIONSHIP

Friendly breakfast... PNG’s Sir Michael Somare and Australia’s Kevin Rudd.

The key international relationship—with big neighbour Australia—has improved rapidly under the new Labour government there led by Kevin Rudd.

A new agreement was signed between Rudd and Sir Michael during the Pacific Islands Forum in Niue in late August, a Pacific Partnership for Development agreement—similar to that also reached between Australia and Samoa, with other islands countries to follow.

The aim is to focus Australian aid funding to a few key areas—infrastructure—mainly roads, universal basic education, and strengthening local level administration. This may bring extra funding, but in return PNG and other islands' signatories commit to achieving better development outcomes and transparency in government operations.

Following the success of the pilot New Zealand “guest worker” scheme with Pacific countries, Australia is starting a similar scheme, in which PNG was included following strong lobbying in Canberra.

This will involve at first 2500 workers from four countries—so it will not solve PNG’s chronic problem of unemployment.

But it will improve the relations between the countries, and will help some eager Papua new Guineans gain valuable work experience.