Law and order issues undermine busi ness in PNG

Rowan Callick



 
Papua New Guinea is teetering on the verge of getting very much richer as a result of not one but now two multi billion-dollar gas projects.
  But at the same time, the backlog of unfulfilled expectations from promises broken by governments dating back decades is threatening to undermine the value of that windfall wealth in raising living standards—just as has happened with the country’s string of mining and oil projects since independence.
  It has been its democratic structure, its open media and its fair courts, that have sustained PNG’s self-respect during some dark days.
  But the prospects of huge wealth and the continuing impact of long unresolved chains of corruption are now bringing especially great strains to bear on PNG’s law and justice system.
  This year, the president of the PNG Law Society and the managing director of a major PNG corporation have spent weeks hiding in their home province after a 100,000 kina reward was placed on their heads, and a gang agreed to attempt to silence them.
  This was revealed in Port Moresby by Tangil Okuk, the son of the late politician Sir Iambakey Okuk, who comes from the same province—Chimbu, in the Highlands—as the two who went into hiding.
  John Mua is the managing director of Motor Vehicle Insurance Ltd (MVIL), which has been pursued for years by the Yama Group, owned by former government minister, former policeman and businessman Peter Yama—the figure at the centre of many legal controversies—over K7.7 million claimed security services.
  Kerenga Kua is senior partner with Posman Kua Aisi Lawyers, which has been representing MVIL.
  The K7.7 million has been claimed instead by Bank South Pacific, PNG’s biggest financial institution, which has been pursuing the Yama group for K39 million in long outstanding loans.
  This is the case which has led to Australian BSP executives Robin Fleming and John Maddison being arrested and charged with conspiring to defeat the course of justice.
  Scare tactics: Australia-based Gadens withdrew from representing BSP in the case, after its staff were threatened. A gun was placed at the head of one lawyer.
  Now the bank has enlisted the services of Blake Dawson Waldron, Yama told the Post-Courier newspaper following Okuk’s appeal for the “scare tactics” to end.
  “I have never done anything like this in my life. I totally condemn such actions. This is bringing my credibility into question.”
  He said the police had warrants out against Dr Mua and Kua that were similar to those against Fleming and Maddison, and that they could be arrested “any time”.
  John Leahy, president of the PNG Chamber of Commerce and Industry, said that threats to judges and lawyers would undermine the investment climate, and that the abuse of the legal system was a serious challenge to the country.
  Madang governor and former chief justice Sir Arnold Amet said: “We are in danger of going down the slippery slope towards the breakdown of law and order and the rule of law.
  “I support the role of an independent, vibrant and vigorous legal profession to protect the interests of their public clients.
  “A vigilant civil society must stand up and protect all professionals from these kinds of thuggery.”
  David Conn, president of the Port Moresby Chamber of Commerce and Industry, said: “The (ExxonMobil-led) gas project has placed our country firmly in the spotlight as a potential source of quality energy resources, and the existing and subsequent investors that should follow will surely be having second thoughts.
  “If they feel the legal system can be manipulated and abused in the way we have seen, they will reconsider.
  “We all congratulated the government when it worked long and hard to set their first gas project up, yet they seem to have run out of breath, or do not care, when it comes to protecting it and condemning any threat to our once trusted legal system.”
  He said the recent attempted assassination of the Chief Ombudsman, Chronox Manek, PNG’s top anti-corruption official—with still no arrests as ISLANDS BUSINESS went to press—as “a direct attack on the fabric of our society”.
  He said Prime Minister Sir Michael Somare, should be leading the charge to defend the legal system.
  In the midst of these controversies, it was revealed that John Dinsdale, a former clerk of the court in Melbourne, is being paid more than half a million Australian dollars a year, tax free, as Australia’s law and justice advisor to PNG.
  Social friction: Cardno, a global consulting firm that recently took over Australian company ACIL, is being paid A$137 million to run the law and justice aid programme, which employs about 60 advisors, over five years to mid-2014.
  While there are different official versions of the numbers killed, fighting has certainly claimed several lives in the Southern Highlands and at Boera in Port Moresby, at villages near both ends of the planned 600-km pipeline down which will flow Papua New Guinea’s great new economic hope, its $US15 billion ExxonMobil led gas project.
  Petty cash box: The incidents may not be directly related to the project—but the pressures from expectations of it, in lieu of effective government service delivery, clearly contribute to social friction.
  A second, US$7 billion project has also been announced by InterOil, which is based in Whitehorse, Yukon Territory, Canada, and is largely operated from Cairns.
  The heightening of expectations from liquefied natural gas projects is intensifying conflicts over land and over access, more generally to the massive flows of wealth that are anticipated.
  It is only weeks since the projects were given the go-ahead, yet the construction phase will take several years—during which such pressure from landowners and from the large proportion of unemployed young people in Port Moresby and elsewhere, is expected to keep building.
  Despite receiving revenues from a succession of resource projects, PNG languishes at 148th out of 182 countries in the UN’s human development index.
  Sir Wilson Kamit warned in his recent handover speech after a decade as governor of the Bank of PNG, the central bank, about  the “hype” surrounding liquefied natural gas.
  He said: “We should not spend any money until we have actually received it. Let’s not borrow against expected income until we have realised it.”
  He urged that the central bank be allowed to manage the revenues from these giant projects, through a fund prudently protected from political pressures “to ensure it does not become a ‘petty cash box’ for anyone.”
  Powes Parkop, governor of the National Capital District, said that by June, construction has to start on new roadworks in Port Moresby, near the parliamentary precinct in Waigani, costing K100 million to prepare for the ExxonMobil LNG project. This will probably be funded by a loan from the Asian Development Bank.
  Challenge: ExxonMobil is preparing to introduce thousands of foreign workers, chiefly from Asia, as the gas project’s construction stage ramps up. Most will be based near Port Moresby, where the gas will be liquefied at a massive terminal, and then exported to Asia by ship.
  Together, the two first projects will spend 2.7 times this year’s gross domestic product of the entire country—risking a rapid hike in the country’s exchange rate to the detriment of other export sectors, especially agriculture which is by far PNG’s biggest employer.
  Sir Michael Somare personally championed the InterOil deal, while his son Arthur Somare, the Minister for Public Enterprises and chairman of the Ministerial Gas Committee, oversaw the preparation of the more conventional ExxonMobil project.
  Somare acknowledged the extent of the challenge provided by the massive new projects, in a speech to his own staff Christmas party in December.
  “We have not trained our people for the projects, which will require between 8,000 and 10,000 workers.”
  ExxonMobil, he said, is asking for 500 drivers. “How do we get 500 drivers in a day?”
  How, Somare asked, can PNG plan to use the vast funds that will start to flow when the ExxonMobil project begins producing in 2014.
  His answer is by setting up a sovereign wealth fund to capture revenues deemed as surplus to routine requirements, and investing them for the longer term.
  But when the 2010 budget was handed down in November, PNG’s Treasury Secretary Simon Tosali described the government’s massive drawdowns from trust accounts as “excessive government spending.”
  Cases involving Yama have become the focus of particular controversy about how the legal system operates in PNG.
  When he was an MP, Yama instigated an inquiry into BSP’s privatisation of the former state-owned PNG Banking Corporation, which he strongly opposed.
  But BSP chairman Noreo Beangke told the inquiry in 2003, that the bank had formerly been subject to political interference, and “had a stigma as a ‘big man’s bank,’ with loans to politicians never being repaid.
  So he announced that lawyers would be instructed to institute proceedings against defaulters, including Yama.
  This pursuit is still being played out, with Australian BSP executives Fleming and Maddison in the front line.
  Justice Minister Allan Marat said last year the issue of missing files and the creation of new files for claims against the state and its agencies had become an issue within the Solicitor-General’s office.
  Early last year, Yama was involved in an intense court battle over a K39 million claim for compensation for a business he claimed was destroyed by traditional landowners who contested a state lease he obtained.
  Yama obtained K16 million in settlement when he claimed the government had failed to warn him of this disagreement.
  Solicitor-General Zachary Gelu approved the payment because, he said, he lacked the information needed for a defence.
  Malaise: PM Somare ordered a stop to be made on one payment to Yama. But when the Finance Secretary, Gabriel Yer, carried out the prime minister’s instruction, Yama persuaded the court to issue a contempt of court charge ordering Yer to explain his failure to make the payment, or be arrested.
  Somare himself appeared as a witness in Yama’s 2008 court challenge against Amet’s electoral success.
  Yama’s lawyer claimed Somare had called Yama a thief at an election rally—but Somare said he had spoken in Pidgin, while the word “thief” was English.
  Paul Barker, the director of PNG’s only independent think tank, the Institute of National Affairs, said “the run of out-of-court settlements of large payments by government bodies has become a serious malaise in the last few years.
  The former Justice Secretary started to clamp down on such deals, but recently she was removed.
  “The police have to operate freely and fairly, instead of acting on behalf of people they see as clients—undermining the whole basis for business in the country. A fight is under way for the soul of the legal system.”
   In the past, he said, there were occasional quirky judgements, but it was always possible to appeal to the Supreme Court.
  “My impression is that the law still wants to do the right thing, but maybe it’s difficult to handle when you are receiving threats—or inducements.”
  Barker said: “It is critical that leaders, officials, businesspeople and the community as a whole come together to stand up to intimidation, or it will destroy the country’s institutions and halt its development.”