Comments

Thank you for your comments, Paul. Definitely if the GDP deflator is only 2.4%, then GDP per capita growth in the Plan is positive, even given its high population growth target. This is not something analysts could have been expected to guess. It definitely should have been made explicit within the Plan. Indeed, that is one of our main points – that much greater clarity is needed around the Plan’s economic assumptions. But we also need to look at non-resource GDP, which we say in the blog should be the focus and which the <a href="https://www.thenational.com.pg/inflation-easing-treasurer/" rel="nofollow ugc">government has repeatedly said</a> is a much better indicator of living standards than total GDP. Since GDP per capita growth seemed to be negative in the Plan, we assumed the same for non-resource GDP especially given the three big resource projects. However, if GDP per capita growth is positive, we need to double-check what is being projected for non-resource GDP. Using Table 3.2, which you drew our attention to, annual average nominal non-resource GDP growth in the Plan between 2022 and 2027 is 7.5%. The Treasury deflator for this variable is 4.8% in the 2023 budget, so real non-resource GDP growth is 2.7%. So with the Plan’s population growth target of 4.8%, non-resource GDP per capita growth is negative. We are back with the conclusion that the Plan is projecting negative living standards. Yes, 4.8% is high as a population growth target, but it is the target in the Plan and we are assessing what it in the Plan. And even with a lower population growth, 2.7% real non-resource GDP growth could well translate into negative per capita GDP growth. The Plan is more pessimistic than Treasury regarding non-resource GDP, with the former giving nominal average growth over the 2022-2027 period of 7.5% for this variable and the latter 9.8% (2023 budget). This is odd, and too pessimistic. In fact, for the approximately 50% of GDP that excludes resources, agriculture, forestry, fishing and manufacturing the Plan is projecting negative real growth. It is not clear why as one would expect a construction boom with three new projects. Your additional insights have certainly been helpful and we have a better understanding of the Plan’s projections now. Now said, these new findings do support the original conclusions which is that the Plan is projecting declining living standards and that, more broadly, the economic analysis underpinning the Plan is weak. The numbers should have been scrutinised before and not only after the Plan was published. And, to repeat the other main point made in our blog, the idea in the Plan that aggregate imports should fall makes no sense.

To provide an opportunity for PNG to showcase a positive destination.

Yes, you're correct, Andrew. I think government should now be doing seperate budget allocation to the 3rd level government which is the LLGs. Because this level of government places a very important roles in the community its deling directly with the local people so I think is the best for the government to do seperate budget allocation directly to the LLGs.

This is an interesting and helpful article for situating Vanuatu's present journey in relation to that of our neighbours. Thanks Jon.

need reference to reply as soon as possible

MTDP IV does not imply a falling living standards in PNG. The title of the article is, unfortunately, misleading and inaccurate. Maybe the article should have been titled “Even with unrealistically high population projections, MTDP implies rising living standards”. On the first measure of living standards, there is now agreement on the nominal GDP growth rate being 8.8% per annum in the Plan. The Plan does use an unrealistically high population growth figure of 4.8% (more on this later). The price deflator in converting nominal GDP to real GDP from 2022 to 2027 is 2.5%. This is the official GDP price deflator used by the PNG Government over this period (see more on this below). This means that on the GDP forecasts, real per capita incomes are increasing by 1.5% per annum (8.8-4.8-2.5). This implies rising living standards. Using the second measure of GDP per capita growing by 4.3%, with the GDP deflator of 2.5%, there is real growth per capita of 1.8%. This also implies rising living standards. Using the third measure of GDP per capita in US dollars, the average GDP per capita growth rate is 2.0%. With a price deflator of 2.5%, this does mean a 0.5% fall in GDP per capita in US dollar terms. However, there is then the variable of the exchange rate. Since 2022, the US dollar to the Kina exchange rate has moved some 5%. By itself, this exchange rate movement averaged at 1% per year over five years once again moves the real GDP per capita growth rate in PNG into positive figures in Kina terms. MTDP IV of course has to build on other Government documents. In the economic section of the report, the Plan is clear that it builds on the Treasury forecasts of GDP. The Plan then increases these forecasts, largely because the Plan is based on the commencement of major resource projects (so a real measure of changes in GDP). Treasury does not include new resource projects based on standard international practice for budgeting of not including resource projects until the Final Investment Decision. However, for Planning documents, there is more latitude. As the plan is based on the Treasury GDP numbers, then the Treasury GDP figures, with their associated deflators, are the source of PNG’s official figures of taking into account “inflation” (as the NSO does not produce forward year estimates). When talking of inflation, the usual reference is to the Consumer Price Index, and the CPI does drive most price index estimates in the non-resource sector. Indeed, the overall deflator for non-resource GDP from 2022 to 2027 does average 5%. However, and I should have picked this up in my earlier comments, we are talking about overall nominal GDP, and this also needs to take account of price movements in the resource sector, especially movements in international commodity prices. The most relevant of these for the GDP figures underlying MTDP IV is the projected 28% fall in prices for the oil and gas sector, which in 2022 accounted for 23.7% of GDP. When building this “negative inflation” for the resource sector into the overall “inflation” for GDP – known as the GDP deflator – the GDP deflator index moves from 167.5 in 2022 to 188.7 in 2027. This is a 12.7% increase in prices for GDP as a whole over 5 years – generalised to the 2.5% annual price index referred to above (although the compound rate is lower at 2.4%). All of these figures on price indexes are available in the annual budget documents (2024 Budget, Volume 1, p151). This is a rather boring table setting out all these assumptions – and I have some sympathy for the authors of the Plan not going into so much detail, although fair point that some higher level price figures could have been included. On the population figure of 4.8%, this number is indeed included in the plan. The figure likely represents the massive uncertainty about PNG’s population estimates, and therefore growth rates from previous years. It was a shock last year to receive the UNFPA report, since adopted by the NSO, of a massive increase in estimated population in 2021 from the 9.1 million in the UPNG/ANU economic database to 11.8 million – nearly 30 per cent. There is now the issue of creating a time series, with annual growth changes, going back to not just the 2011 Census, but also the possibility that these population estimate errors may even go back to the times of Independence. However, the 4.8% figures is just unrealistic. Most commentators, consider the earlier NSO estimate of 3.1% was too high. The current highest population growth rate estimate for any country in the world is 3.7% (Niger) according to World Bank data. 4.8% would have PNG’s population growing at a much, much higher rate than any other country in the world. This is just not realistic, and the headline of an article analysing a 300 page plus plan should not rely so much on just one figure.

Namastey Sir I came to know that in Fiji and other parts of the world, there are people belonging to Ballia district, whose ancestors had gone there as indentured laborers. Do you know any such person, whose ancestors were residents of Ballia?

I mentioned ‘novation’ when I responded to Burton and Banks blog post on Porgera (Devpolicy 2 May 2020). ‘Novation’ is often used when the rights and obligations of a contract are relinquished by one contracting party and transferred to a new contracting party. In PNG the mining development contract is between the miner and the state. For New Porgera Ltd to step into the shoes of the former miner requires the agreement of all the parties to the contract. This includes both State and all other affected parties. Meetings were held under the auspices of the State and Barrick to ensure that consent for the transfer was obtained from all. It is an open question as to whether or not New Porgera Ltd will now take formal steps to broaden its consenting base to include distantly mine-affected landowners, land-users and their communities. Banks and Burton seem to be confused about the payment of royalties to mining lease landowners. The royalty is a gift of the State and is made to the landowners whose land is the source of the mined gold . The gift is an acknowledgment by the State of the partial and local sovereignty, in civil law terms, of landowners within their customary law domain. Prior to the transfer of the royalty money benefit by the State there must be an acknowledgment and a formal acceptance of the gift by the landowners. For the making of a mining development contract this acceptance process is described as a ‘development forum’. Since the forum involves issues pertaining to land the acceptance of the gift by the landowners, or their representatives, must be made in writing. Renewals of these acceptances were made before the re-issue of the mining development licence to New Porgera Ltd. Under the Mining Act the State appoints ‘agents’ to ‘find’ the project-affected landowners. Having ‘found’ some landowners these state-appointed agents must now transform themselves into representatives of the landowners. Following landowner authorisation agents may, on behalf of landowners, become the primary recipients of any landowner benefits paid out by the State. This downward flow of benefits via an agent ignores the ‘stickiness’ of money and encourages the emergence of hierarchical arrangements. Adopting a system whereby benefits are paid directly to households tends to mitigate hierarchy related issues and gender bias issues as well as producing better (but not perfect) equitable outcomes between and within households. It also counter-balances the anthropological consultant tendency to support a pronounced gender bias when describing customary landownership in PNG. A focus on households in the context of social mapping and landowner identification will have the effect of limiting the anthropological consultants use of idiosyncratic, in this context, concepts such as ‘zone ILGs’, ‘genealogical footprints’, ‘ground truth’, etc, and the privileging of mythopoeic monologues as key determinants of customary land ownership will simply fade away. Vailala

This is actually a fourth set of figures consistent with our theme that the Plan is projecting declining living standards. If 2022 GDP is K107.8 billion and 2027 GDP is K164 billion, then annual average growth is, as you say, 9% (8.8% to be precise). The Plan targets annual average population growth of 4.8% (p.185). This is high, but it is clearly presented in the Plan as the target for population growth. So the implied per capita growth target is 4%, and that is below the expected rate of inflation (not given in the Plan, but as you suggest could be around 5%). We’re not saying the MTDP IV intentionally projected declining average living standards, but that’s what its numbers actually imply.

Thank for disseminating informative information, indeed urgent action is required to ensure health and well-being of PALM workers are protected. Cultural support workers from the community are vital for an equal balance of power and to eradicate rife exploitation that is currently happening. As a Migrant from the Pacific, its very disgusting to find that death rates of the PALM workers have increased significantly in the last financial year. Not only that terminal illness have increased as well and then isolating them from family is total cruelty. It goes to show how arrogant and selfish employers can be. Criminalisation of such approved employers should be a wake up call to Australia to be aware that the migrant community are very aware of slavery. The benefit should be balanced, at the moment it is biased and needs fixing or things will get severely worse. If Australia continues to send Pacific dead bodies home, then what type of relationship is Australia trying to foster? It better be a wake up call for radical change because frustration has reached its peak.

[Conflict of interest alert - I work for the PNG Government] Table 3.2 on page 15 of the MTDP IV sets out the specific GDP projections in the plan. These show an increase from an estimated GDP in 2022 of K107bn (the actual outcome was better at K111bn based on latest forecasts) to K164bn in 2027, an increase of 53% over 5 years. The nominal growth rate in GDP is therefore not 6.8% set out in this article, but 9% per annum compounded. Allowing for 5% inflation, and population growth rate of 3.1%, this implies an increase in real GDP per capita of around 1% per annum. This is not falling standards. Disappointed by the standards of this analysis - with a focus on the Executive Summary and page 2, not the more detailed analysis provided in the Plan. There are uncertainties about PNG's current level of population, and therefore its population growth rate. This year's population census will hopefully assist with this. At this stage, the above comments are based on the previous NSO estimates of a growth rate of 3.1%. This is still higher than the figures used by the World Bank and others (including previous analysis by the ANU such as the 2.7% rate used in the UPNG/ANU economic database). Lower population growth rates would increase the annual increase in real living standards. Of course, PNG is looking to lift these real economic growth targets even further. This is why the Pangu Party policy is targeted at lifting real non-resource GDP growth rates by at least 5% per year. This allows for steady increases in real living standards, and even small annual gains can compound to major advances over decades. This comment does not address other issues within the MTDP IV. However, the headline of this article is arguably misleading and therefore the focus of this response.

Let's just decided on the favour decisions rather than any talks ,comments, discrimination and so on .. because we waited for so long....