Rowan Callick

 

Old antagonisms are returning to Papua New Guinea politics as the stakes grow higher with the ever-increasing likelihood that the country—or at least its capital Port Moresby—will become awash for a few years in cash trickling, perhaps even streaming, from the biggest ever single deal the Pacific region has ever landed: a $A15.6 billion liquefied natural gas project.
This follows an unusually prolonged period of political stability, chiefly the result of constitutional changes introduced a decade ago by Sir Mekere Morauta—who is the leader of the opposition.
The chief beneficiary has not been Morauta himself, but the wily veteran of PNG politics, Sir Michael Somare, whom he served at the country’s independence as its “young turk” Finance Secretary.
But in late July, the government’s massive parliamentary majority appeared to come under threat—the underlying reason, unhappiness within its own ranks over perceptions of the unfair distribution of grants and other sources of funding.
There was grumbling on the backbenches—filled with large numbers of MPs facing the prospect of failing to gain a ministry during this parliament—that they were still awaiting payments for their own constituencies, while a “charmed circle” of ministers were gaining kudos by travelling through the provinces and distributing funds.
As the groundswell grew, Morauta acted while he retained the majority to do so: he suspended parliament for four months until November—claiming this was necessary to refurbish Parliament House.
PNG IN HELL? Former prime minister Sir Julius Chan, now in opposition, said PNG was not in political limbo but “now in hell.”
However, the tactic appears to have worked. The pause has given Somare time to start paying attention to his fractious back-benchers, and their payments have begun to roll out. It may now prove difficult for Morauta, his deputy opposition leader Bart Philemon and Chan to convince those government supporters to fulfill their promises of late July and to move across.
Not that it’s all plain sailing for Somare. He has lost his most senior cabinet member from PNG’s most populated region, the Highlands, with Works and Transport Minister Don Polye losing his seat due to an election tribunal finding that his election was compromised.
Treasurer Patrick Pruaitch, a member of the government’s inner circle, is facing serious charges by the Ombudsman, which has asked the prosecutor to establish a leadership tribunal to hear the case.
And the Samoa Observer has reported that Belden Namah, the PNG Forests Minister—Pruaitch held the portfolio earlier—has spent more than T$5 million on three properties in Samoa.
But Namah has replied that he was not the ultimate purchaser, but was acting for overseas associates, whom he has not named. Before entering parliament at the last election, he was a captain in the PNG Defence Force.
Somare seems likely to reshuffle his cabinet before the November sitting in order to make the required adjustments and to shore up his position in the event of another attempted no-confidence challenge.
A leading observer of the PNG political scene says: “The opposition, despite its increased numbers, has one problem. It cannot agree on its alternative prime minister. It probably shares the view within the government that it needs to persuade a senior government minister to accept the nomination if it is to have any serious chance of success. There are no signs that any of the possible targets are interested.”
The government has also struggled to address the issue of rising antipathy to the role of Chinese involve in the country. Three months ago, many of the country’s major towns were shut down for days as Chinese-run stores were looted, and four protesters were shot by police.
The parliament formed a 15-member cross-party team to investigate the riots, including “reviewing the types of businesses operated by Asians, and the causes of resentment by nationals against Asians involved in those businesses.”
The chain of violence and destruction began with a fight between Chinese and Papua New Guinean workers at the construction site, on the coast south of Madang, of a nickel refinery being built as part of a $A1.4 billion mining project by Chinese state-owned giant Metallurgical Construction Corporation.
Three Chinese workers were evacuated to a hospital in Port Moresby with serious injuries and 30 vehicles damaged or destroyed during the affray after which 70 Papua New Guineans were charged with fighting.
Since then, mine construction has also been shut down for a week by government inspectors on safety grounds before being allowed to restart.
UNIQUE MEMORANDUM: Rhona Nadile, the official responsible for work visas, said that Chinese workers brought into the country for the Ramu Nickel project were exempted from the legal requirement that foreigners working in PNG have to speak one of the three national languages: English, Pidgin or Motu.
Under a unique memorandum of understanding, these new Chinese employees who did not speak English were instead required to attend a special Pidgin school established by the Divine Word University in nearby Madang. But attendance, she said, had faltered and the agreement is now being reviewed.
A protest march was held in Port Moresby, sparked by the earlier fight at Ramu, to petition the government to reduce the immigration of Asians in PNG, a general term that refers chiefly to people from mainland China and to Malaysians, mainly also ethnically Chinese—to screen citizenship applications more carefully and to tighten border security generally.
Noel Anjo, chairman of a group called NGOs and Civil Society Coalition, said: “We welcome major investors. It is only the foreigners who overcrowd small businesses that we want out, businesses Papua New Guineans are able to run.”
Fast-food outlets known as “tucker boxes” and other small businesses run by Asians swiftly closed down in Port Moresby and other cities as the protests then spread.
Such retail operations have typically provided the main channel in the past for Papua New Guineans to set up in business.
But they have been largely de-localised in recent years by Asian operators with access to much cheaper products.
The rioting spread first to the second city Lae, and then to Madang and through the Highlands—to Kainantu, Goroka, Wabag and Mount Hagen. Prices for basic foodstuffs soared as most stores in the towns were closed for two days.
Parliamentarians widely blamed the riots on unemployment, which is running up to 80 percent, especially among young people, in PNG’s towns.
Former chief justice and Madang governor, Sir Arnold Amet,  said that poverty, fed by unemployment, was leading to “a genuine sense of grievance.”
SUCCESSOR: A parliamentary investigation is conducting hearings around the country.
Another continuing issue is the provision of parliamentary seats reserved for women candidates. Yet again at the last election, in mid-2007, only one woman was elected—Carol Kidu, who remains a minister.
The constitution allows for the appointment of three women.
Somare supports the move—which has heavy backing from powerful women’s groups in the country at large. But he faces opposition from a significant number of his own MPs.
Beneath these other political issues remains the underlying, unresolved question of succession.
This is a question that has teased and tantalised PNG politics for 30 years, ever since Somare lost power for the first time to Chan. 
Several of PNG’s most eager leaders have since then counted on what they believed to be half-promises, that they had the inside track and then left Somare’s ranks once they have realised their hopes would be dashed, to form rival parties.
Somare, however, has outlasted most of those rivals. Now aged 73, he is naturally slowing down, but showing no indication that this also means stepping down any time yet–even, it seems, for his son Arthur, the Minister for Public Enterprise.
He celebrated the extraordinary achievement of 40 years in parliament while giving the impression that he might well plough on to 50.
This is all the more likely now that the gas project appears a certain goer.
While the scale of this project dwarfs everything that came before, the principle is not new. PNG’s economic hopes since independence have focused on one huge mine or energy project after another, getting progressively bigger.
Each has been hailed by the government as the answer to PNG’s grim list of problems.
LIVING STANDARDS: But living standards have kept sinking, regardless. PNG is now 149th of 177 countries in the United Nations’ human development index, well below its Pacific islands peers.
The new project will involve gas being piped down from the Highlands to a liquefaction plant near Port Moresby and shipped to customers in China, Japan and Taiwan.
This will inject huge amounts into the economy. But will it, as before, just ratchet up the corruption and distort the economy so severely that many of PNG’s other businesses can’t survive?
History does not offer reasons for optimism—though the sheer scale of the LNG deal provides plenty of cash to trickle down. And the economy is in better shape than it has been for some time, thanks in part to that record run of political stability, only recently shaken.
The big ventures on which PNG first hung its dreams were Bougainville, which had been Australia’s gift to the nation as an income-earner, and Ok Tedi, both massive copper mines–the latter lauded by then Prime Minister Chan as “the pot of gold” at the end of PNG’s rainbow.
They were followed by the Porgera mine, which at its peak produced more than one million ounces of gold a year, then the launch of PNG as a medium sized oil producer, and the Lihir mine, now expanding to about 800,000 ounces per year–rivalling Australia’s biggest gold mine.
Each of these projects defied the odds to get developed–being constructed in extraordinarily remote and mostly difficult terrain, requiring remarkable feats of engineering.
They have mostly also succeeded in navigating anthropological mazes to establish ownership rights and organise compensation and royalty payments in the face of sky-high expectations on the part of local populations who had mostly been neglected by governments and had become very well aware that this would be their one shot at shifting out of rural poverty.
Inevitably, such a weight of expectation has at times created a burden to heavy for any project to bear. The lesson was learned early at Bougainville that it could prove fatal to rely on the Port Moresby government to play its full part in meeting those expectations. Its failure to review the royalty structure as the mining agreement stipulated, led directly to the civil war and closure of the massive mine.
Since then, private operators have ensured that they do whatever it takes to keep the local population in the project area as content as possible.
The big failure has been to connect the revenues flowing to the government–which is also granted part-ownership of every resource deal–with the broader economy.
Former prime minister Paias Wingti called the Porgera mine his “engine for growth.” But nothing much grew beyond the Porgera area itself.
Instead, these super-projects have tended, especially during their construction phase, to inflate costs, boost the kina and diminish the opportunities for more sustainable businesses to emerge.
At the same time, the revenues from the resource sector flow through a narrow pipe–compared with, say, tourism, farming or fishing–and are thus easily diverted into the pockets of the political elite.
Last year’s exports from PNG to Australia highlight the consequent narrowness of the economy: gold comprised $1.6 billion and oil $1.2 billion of the $2.9 billion total, with coffee the next biggest category, at just $31 million.
DANGERS: Paul Barker, the executive director of PNG’s independent think-tank, the Institute of National Affairs, says the country “too readily seeks individual projects or other initiatives—even crops like vanilla—to be the panacea or single solution to meet its economic problems or aspirations, rather than concentrating on far ranging reforms and measures, including the removal of impediments, to improve the wider prospects for investment and business”.
He says: “The LNG project has many attractions…it’s large and long-term, has limited direct negative environmental impact, will provide a steady revenue flow.
“On the downside, it’s so large that it will invariably have a major impact on the economy and society, particularly during the construction phase, with a major risk of distorting macro-economic conditions and expectations to the detriment of other businesses, particularly agriculture which provides the jobs and income needed by most of the population”.
Corruption will be another danger, Barker warns: “The sums of money envisaged, including to limited numbers of landowners, will provide a major incentive for abuse, both within government and within and between landowner groups.
“The resource-rich Western and Southern Highlands provinces provide stark warnings—having some of the worst services in the country and high levels of financial abuse.
“Landowner groups in the logging areas demonstrate how readily some leaders can hijack the benefit stream from royalties and consume the proceeds, often in beer and other services in the urban centres of PNG and overseas, with little if any tangible or lasting benefits back home.”
He says: “Whether PNG and its leaders have the vision and commitment to apply the necessary discipline and restraint shown by countries like Botswana and Norway in ensuring a broader-based and longer term development, or will it go the way of Nigeria and Equatorial Guinea where the proceeds are appropriated by a small elite whilst the rest of the country festers, will be a challenge for the entire community.”