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From Gebby Yai on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Thank you Terrence,
This is very true in Solomon Islands.What else can we say or do?This is like a link that transform from our ancestor to this modern world.
From John Burton on Papua New Guinea loses another Vice Chancellor
Three down really, if you count the removal of the top tier of management from the University of Goroka in 2015.
The capers at the top distract from more basic facts PNG's state universities are funded at a fraction of the level they were in 1975 (at 17th of the level according to one ex-prof https://johnmenadue.com/allan-patience-the-serious-under-development-of-papua-new-guineas-university-system/). A colleague has been pursuing anything recent written on science education in PNG but, unless there is a hidden trove of unpublished PhDs somewhere that he hasn't found, in the last 20 years the field seems to have gone dark. It presages rather badly for the critical shortage of useful people like doctors, civil engineers, and properly qualified provincial disaster managers (Madang's is a former seminarian). Nothing is surprising here.
We have polio back, such that several DWU staff needing to travel later in the year are going for boosters at Modilon this morning. Sadly to say, but the 5th funeral on our small campus for this year is scheduled for this afternoon. Stark fact: members of our university die faster than we can graduate new ones with higher degrees to grow the teaching body. Four to five deaths is the average for the last six years.
At what point will PNG's governmental idleness to provide for its own development future, coupled with emerging bio- and health threats, cause its regional neighbours to begin classing it as a menace to other countries in the region, I wonder.
From Terence Wood on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Hi everyone,
Thank you for your comments. They're all interesting and thoughtful. Unfortunately I have encountered unexpected health issues and so cannot give the comments the time they deserve at present. I'll do my best to return to them as soon as possible.
Terence
From Vailala on Papua New Guinea’s disappearing resource revenues
I thank the authors for this interesting blog-post. As the authors say the BPNG statistics that follow the old MRSF reporting model (BPNG Table 7.2 (https://www.bankpng.gov.pg/statistics/quarterly-economic-bulletin-statistical-tables/) show a marked discrepancy between the posted value of mineral resource exports and the aggregated value of resource company taxes and resource development SOEs dividend payments.
But the BPNG tables are only a small part of the overall picture as the recent EITI report makes clear. GoPNG has, following the Bougainville crisis, for many years pursued a strategy of increasing the value of both direct cash payments and quasi-fiscal sub-national payments to resource project-affected landowners, LLGs and PGs, especially so in relation to petroleum projects.
The balance that was struck between the national interest and the local interest has moved from the initial Bougainville point of about, say 98:2 to somewhere near 70:30 in terms of benefit flows. In population terms the perimeter fence that establishes who will receive both direct (cash payments) and less direct local area benefits from resource development has greatly expanded beyond the confines of the original Special Mining Lease context. For example, the expansion of Ok Tedi benefits to encompass downstream project-affected landowners. This expansion has proceeded apace in the petroleum projects with the PDL concept of large graticular blocks and petroleum pools that extend over several such blocks. The PNG LNG project and the ‘unitisation’ concept has further enhanced this tendency. In the interests of resource contract stability and the creation of a social licence to operate GoPNG has increasingly found ways to divert resource project benefit streams into the hands of landowner beneficiaries, LLGs and PGs. There has been an evolution of the PNG legal regime for resource development. Under the Petroleum legal regime the royalty, development levy and landowner/PG equity shares, are taken off the front-end of the project and are the property of the recipients, held in trust accounts, and are not part of the GoPNG project-derived central government revenue stream, at least not in the form of taxes and SOE dividends.
In addition to these changes, all of which have an impact on the quantum of the GoPNG benefit stream, there are other public goods investments derived from resource development projects. The easiest of these to quantify are the Infrastructure Tax Credit (ITC) arrangements to which Paul Flanagan relevantly draws to our attention. At present ITC arrangements are only to be found in the PNG LNG Project and they are specified and described in Exhibit F of the PNG LNG FID (https://www.banktrack.org/download/png_lng_gas_agreement/080522_pnglngagreementexecutionversion.pdf). For the LNG Project GoPNG has allocated K1.2 billion divided over two five year periods. The scheme covers 107 km of public roads, including 23 bridges and about 7000 metres of culverts. The construction cost is offset against the LNG Project companies tax liabilities so the effect is of a direct transfer of benefits from the national to the local/regional interests. It is also, of course, revenue foregone by GoPNG. The ITC arrangements are currently the subject of GoPNG review. It may be that the better GoPNG option is not to finance these projects by way of tax credits but to bring them ‘shovel ready’ to the AIIB for concessional financing. Certainly the funding of rural roads is difficult to justify using conventional World Bank/ADB assessments in terms of EIRR and FIRR measures. Recourse to Chinese development thinking may be an effective way around these conventional economic road-blocks.
As the EITI report notes (p. 142), in order to understand the economic effect of resource projects in PNG, it is necessary to develop a much better understanding of the role of sub-national payments in both mining and petroleum projects. There also needs to be improved reporting. For example there needs to be better analysis of the quasi-fiscal payments made by OSL and ExxonMobil. Listed payments for 2016 were K43 million (OSL) and K 80 million (ExxonMobil, this later figure is garbled in the EITI report). The EITI report lists these items as discretionary social expenditure but information is not available to fully assess the infrastructure and socioeconomic development impact of these expenditures. However, it should be noted that both companies employ PNG staff who are actively engaged in responding to community welfare and development proposals. ExxonMobil’s focus on local economic growth appears to be both well-thought out and well-implemented by its PNG staff.
My point is that all of these various expenditures variously contribute to meeting community development needs and infrastructure development. Collectively they have not merely a local effect but also a pervasive effect on the wider area, the province and the nation as a whole, difficult though it may be to capture all this in a conventional cost/benefit analysis.
Despite the fact that many years have elapsed since the LNG Project Social Mapping and Landowners Identification Studies should have been completed it is still unclear as to exactly how many people will be directly affected by LNG Project infrastructure investments and royalty and development levy payments. Estimates vary between a low of 30,000 to a high in excess of 60,000. Assuming, as a minimum, at least 8000 households and estimating a cash equivalent for income derived from subsistence production it may be that a project-affected household will experience a doubling of their household income when the royalty benefits and other benefits are finally paid. But I attach no significance to this estimate because it is entirely speculative.
But there is an additional point here that relates to the discussion of the proposed sovereign wealth fund and the usual Norway model for the natural resource development context. Proponents of an SWF rarely refer to the World Bank’s Chad-Cameroon Pipeline debacle. What receives only a bare passing mention in the BPNG discussion paper on the PNG proposed SWF is the Alaska Permanent Fund. This Fund makes cash payments (currently USD$1,600) on an annual basis to all Alaska residents. This is the Permanent Fund Dividend. The creation and structuring of the Alaska Permanent Fund were motivated by a belief held by many citizens that at least a portion of the revenue derived from oil exploration and development that accrues to the State should fall outside of political control.
In effect PNG has created its own improved version of the Alaskan arrangement. PNG has achieved a sharper division between politically controlled resource derived expenditure and household controlled resource derived expenditure. We know that delivering cash payments into poor housholds has an effect on welfare (including nutrition, health and education) and that these improvements in turn lead to improvements in productivity, especially in a poor rural subsistence economy.
As far as GoPNG LNG Project derived equity income is concerned the arrangements are briefly summarised in the EITI report which mentions GloCo, the SPV that handles gas marketing sales proceeds and ensures repayments to the project lenders (p 103). No doubt the requirement to pay back lenders is greatly constraining the growth of the Kumul equity interest dividend. Some information on the financing of the LNG Project can be found here -http://www.gastechnology.org/Training/Documents/LNG17-proceedings/1-6-Steven_Kane.pdf
As a final comment on ‘fairness’ I think it is appropriate to point out that GoPNG embraces resource development by entering into unincorporated joint venture (UJV) arrangements with developers. A UJV arrangement is preferred in many cases because it is a risk management or mitigation device for the co-venturers. A UJV is typically not a legal entity. The relations between the co-venturers are governed by contract in the form of the Joint Venture Operating Agreement. The co-venturers obligations are to meet the project capital expenditure obligations in proportion to their respective licence shares, apportion costs across the respective licence shares and to take their profits accordingly. Generally speaking a concession made by GoPNG to the resource developers is, pro rata by licence share, benefits the SOE that holds the GoPNG equity share in the licence. With these points in mind the LNG Project is no more, or less profitable for GoPNG than it is for ExxonMobil.
Vailala
From JK Domyal on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Thanks Terence for this piece
As a learned citizen of this country-PNG, what you have described did developed into a conventional electoral politics now unlike in the 70s and 80s. There is one common character shared by both PNG and SI that gave rise to this clientelism politics.
That common shared cultural character remains in our blood system and it will not change in the near future-Melanesian way of life!. Not even foreign aid will improve that, even if the aid is tied to specific condition to improve clientelism politics.
Therefore, to change this clientelism politics, it has to change from within ourselves-change our way of thinking and character. This would come with a new crop of leaders or citizens that can think differently -for an equitable governance and better life. If the aid programme were guided in this approach would be an ideal option.
Otherwise, time will tell when this clientelism politics will continue until it blows out of proportion-rise in poor governance and worsen poverty across the country and citizens started to question each other and their leaders. This is the moment our electoral politics will change.
Changing the election laws or improving the electoral system or introducing ID for voters will not change. It may work well in other countries but not in a Melanesian society where electoral politics is intertwined with cultural character, norms and values.
To understand poor governance and poverty in an island countries like PNG and SI, one would need to go down that path of understand what is all about Melanesian politics. Currently clientelism politics is a stronghold status quo in PNG now.
From Titus Futrepa on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Terence Wood, You have hit the nail on the head.
PNG is currently not run with fairness in terms of Annual Budget fund allocations on timely basis.
In the 20 years most Government run services hardly received annual full funding right across the country.
Therefore it was very difficult for all citizens in accessing better services at all times.
From Bernhard Weimer on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Liked the analysis of the impacting of electoral politics on provision of public goods and services in SOI. Was useful for our analysis of fiscal resource constraints of Provincial governments for their assignment to deliver public goods and services.
From Chris Bone on The three political economies of electoral quality in Solomon Islands and Papua New Guinea
Short of supporting the Solomon Islands Green Party which will soon be registered the best way for donors to support change would be to fund awareness programs on governance and democracy at village level.
From Chris Bone on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
I work in the Solomon Islands and recognise this is the #1 issue preventing sustainable development. To cange there needs to be major awareness campaigns in the villages. The SI government through the way it distributes the Rural Development Fund and MP termination oayments supports tbe status quo.
From Scott Dooley on How politics keeps Solomon Islands and Papua New Guinea poor and poorly governed
Thanks for this good article. This is a point I make a lot regarding politics in PNG. Sadly I think for many areas of PNG there is a downward spiral of fatalism. Many people I know believe most or all politicians will be corrupt and so they vote for their own tribesmen or whoever promises the most to their tribe (including money for voting). They often do this while openly admitting that the person they vote for will not be a good leader, but again since they believe there are few or no truly good leaders they want whoever will help them specifically the most. In fact as each group of corrupt or inept leaders continue to make the country worse in terms of economy and service provision it further drives people's desperation to benefit in some way making them ardent supporters of whoever promises them the most directly.... hence the downward spiral continues.
From Steve Pollard on A new perspective on aid delivery