Comments

It may be worthwhile to add a little background to the discussion of the ‘Double or Nothing’ report. The 2006/7 Acil report is a revised version of a report prepared for the Gas to Australia project. This earlier report and the report under discussion were prepared to meet legislative requirements for reports of this character. The Organic Law on Provincial Governments and Local-level Governments has relevant provisions for a ‘cost and benefit analysis’. S 115 deals with the control of natural resources and S 116 Specifies the Resource Development Process and the responsibility of the National Economic and Fiscal Commission - S 116 (2) The National Economic and Fiscal Commission shall carry out a cost and benefit analysis for and in relation to the development of natural resources. The Oil and Gas Act S 174. refers to this Organic Law provision - (1) The total benefits granted in accordance with this Act to project area landowners and affected Local-level Governments and affected Provincial Governments and any other persons or organizations shall not, when added to other costs incurred by the State in the course of the development or operation of a petroleum project, exceed 20% of the total net benefit to the State from that petroleum project as determined in a cost-benefit analysis under Section 116 of the Organic Law on Provincial Governments and Local-level Governments. (2) No commitment shall be made by the State pursuant to Section 171 or 173 unless the Minister is satisfied that, following the provision of any benefits or grants which might be agreed under those sections, Subsection (1) is complied with. The PNG National Economic and Fiscal Commission has a general power to make use of documents prepared by other persons. In common with many others I attached little significance to the Acil report for a number of reasons. These included the estimation of oil price futures over an unsustainably long time, the incorporation of the 3 price case scenarios within the broader economic analysis, the very ‘rubbery’ modelling of the PNG economy and a susceptibility to the common CBA problem of ‘optimism bias’. It may well be that the main purpose for having the Acil study done was to put a tick into the box on the ‘to do list’. To expect that the Acil report could have aptly modelled the changes in the LNG markets for wet gas between 2006 and 2018 is, I think, unrealistic. To now attack the report on the basis of its shortcomings seems to me to be like savaging a long dead sheep. Vailala

This is a quick response to the comments of Paul and Terrence. I have read the entire report, in particular page 17, footnote 22 and the appendices. My fundamental point remains. It needs to be made very clear to the reader, especially those without modelling expertise, that if the report’s assumed growth path is wrong then the results it reports will be wrong. This includes the results in Table 1. Related to this, it also needs to be made clearer that the baseline referred to in the third column of Table 1 is not an actual baseline, but the assumed growth path. Many readers would not be aware of this, I would suggest. On the growth path itself, what ideally needs to be done is to credibly model the growth path that would prevailed in the absence of the LNG project, and not rely on an assumed path. But I acknowledge that this is no easy task, and data availability might rule it out. In these situations, what is often done (and needs to be done), is to provide a number of growth paths, such as high, low and expected on the basis of available evidence, and report results that correspond to each. This is not, as Terrence might suggest, a case of needing more data. It is simply a matter of spending more time with existing data, and being very clear about the caveats that apply to results that are reported. Such an approach is consistent with the report’s call (on page 40), for a code of conduct for modellers, which I fully support.

Lending a vote of support to Paul here. He did a valuable job, in a context that is hardly data rich. As he says, there's also the appendices if you want more details. It would be great if there was more detail again still, but at some point that task has to fall to governments, who have the information and resources. Thanks Paul

A quick initial response as I hope that I'll be allowed to give a more detailed response in a future blog. First, we are in furious agreement that there is need for better modelling of the PNG economy - it was in fact a recommendation of the Jubilee Australia report. Second, it is not clear that Mark has read the full report. The issue of underlying growth trends was recognised as the most challenging issue in the report - see lead question in Appendix 2. The report did include key outcomes from a sensitivity analysis of alternative trend assumptions (page 17) indicating alternative realistic figures of underlying growth would not change the report’s conclusions. A blog will go into more details why the conclusions of the JA report should not be treated with a "pinch of salt" - there are fundamental issues about PNG's future path of development. Cheers. Paul

Thanks Tess!

Samuel Ray, your comments are shallow. See the publication via http://cadmus.eui.eu/handle/1814/5972. and confirm the authenticity of his PHD Paper. Indeed the law is weak in PNG. Its very embarrassing.

Thanks for your thoughtful comment Stephen. I'm aware of the per capita calculation but preferred to highlight the low regional share of ODA received by the Pacific, as the region is also the ocean space, the ecosystems and many other aspects which are critical for sustainable development. One of the objectives of my post is to highlight the fact that there is more to the Pacific than the traditional "per capita vision" allows for and to underscore some of the reasons why the Pacific matters and should, in my view, be given greater global consideration.

Many thanks for commenting Mere. I agree with your thoughts on the rich heritage of Pacific peoples.

Thanks for your feedback Nancy. Glad you enjoyed the post.

Thanks for this, it is a very clear explanation for us non-economists. As you say, the real questions are around how this money will be spent - we will all be watching that with interest

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Thanks for this comment. Moyo's book is very weak, and I don't think she can be described as an economist. But Helen Hughes had a point. Whether or not aid is bad for the Pacific, it doesn't seem to be that good. New approaches are needed, which is why it is so good that the Australian government is now giving much more emphasis to labour mobility, including starting to use the aid program to promote labour mobility. A lot more could should be said in response to your important comment, but I'll conclude for now by saying that we welcome all quality submissions related to aid - positive or negative - and especially from those in recipient countries.