Comments

Unsure how a picture of Idi Amin is germane to a pitch for more Australian aid, little of which has gone to Uganda or Africa. The picture is definitely not of Mobutu Sese Seko of Zaire or Robert Mugabe of Zimbabwe.

I like the concluding part of this article, '''Doubting the'''' effectiveness of Chinese investment and the ability of PNG to keep firms (from China and elsewhere) accountable. My view: Indeed we lack the ability to hold the investors accountable mainly due to lack of transparency because individuals are involved and some deals are done under the table. Recently I visited a factory that built the overhead bridge in front of the VC in POM. I was told that NCDC engineers, managers etc visited the factory, yet they didnt take notice of the hazards or safety concerns, which were enormous. I asked the manager of the factory what these officers said about his factory and the reply stunned me, that they are happy that the factory can get work done. See, we do not follow the norms and procedures ranging from not just financial management and experiences of projects of these kinds, but all details like safety, the rights of workers, people's fatigue management, the work environment etc. Those people who represent PNG need to look at these from a broader perspective. When I asked why there was no investment from the US or Australia and again when asked if people from these countries came to visit, their answer was that they don't allow them to come. So, investors take advantage of our ignorance and also what they give under the table and think we have done a good job! The reality of background that needed to be checked stings!

There is a need for further research to understand systematic approach by Chinese government to exploit a vulnerable country like Papua New Guinea if Papua New Guinea wants to take this burden off its shoulders. Where Papua New Guinea stands today in puddle of swamp would take a fair amount of decades to come out given the depth of loan we owe China and the volume of corruption within Papua New Guinea Government.

Chinese companies are set to outbid other local and foreign companies and secure many of the large scale projects in the country. It will be difficult to stop this trend due to many reasons. One reason is most of the money sourced for the various projects come from the Chinese government. Thus, they will want their own companies just like what Australia has done.

I like the comment made by JK Domyal. As someone who lived and studied in China. I feel that China has more to offer PNG compared to Australia. This is reflected in the PNG government's position. Also the recent trip by NCD's political heads and Tkatchenko's comment on China in the local media supports this point. PNG has a special place for Australia but we cannot ignore the rise of China. In regards to security, it is a security dilemma that Australia is faced with. The increase in China's capability is a threat to other established powers or middle powers like Australia. Australia will slowly lose its influence in the region as China continues to grow. The challenge is now for Australia to change the way it sees its Pacific neighbours, especially PNG. Maybe it is time to see PNG as a peer regardless of the developing country tag rather than small brother. In order words, a mutual relationship rather then a patron-client relationship.

There are two issues that, although outside the discussion, give rise to low borrowing levels. The first is stringent rules for eligibility to borrow. Although not as stringent as commercial banks, they are still restrictive enough that 90% of people who save with those MFIs cannot meet the criteria. The second is interest rates. A micro loan is for a small emterpreneur making small profits yet the interest rates are comparable to commercial banks. No one wants to borrow.

I do agree with this article, the demand for microcredit in PNG is low relative to the neighboring pacific and Asian neighboring countries. From my view as a practitioner in the industry over the last 10 years, the rationale for low demand for credit from licensed microfinance institutions(MFI) can fall into these four categories; 1. Lending Culture of Microfinance institutions(microbans & sls): The lending culture in these two types of institution (microbanks & SLS) varies on three aspects but not limited. These include; the regulatory requirements, capacity, and the management of this institutions. SLS lending is strictly regulated by the Central Bank of PNG while microbanks are not. In a strictly regulated environment “you only do as told” and institutions cannot expand their lending portfolio or improve their investments. SLS and microbanks still lack the technical capacity, though there were intervention by donor agencies in funding technical support for this institutions. The management of these institutions are critical to their success and growth. Many of these institutions have portfolio at risk sitting at above 10% and some 20%. The smaller ones even have greater PAR. Because of their lack of doing proper credit assessments and reviewing of their credit products/policies based on market demand, resulting in many bad loans, they are becoming risk averse in their lending. Their credit risk interventions measures are having an adverse effect on the customer apatite to borrow. 2. Pricing of lending products: Unlike the microbanks, who set their own pricing, savings & loans societies lending products interest rates and loan rations are regulated by Central Bank of PNG. All interest on loans are 12% per annum and loan ratio of 1:1 (100% savings collateralized loans). Any increment in the loan ratio to collaterals are to be approved by the regulator. Customer are not able to borrow more than what they have in savings. At some instance SLSs have requested BPNG for increment on loan ratio for consumer lending including school fees etc… SME lending by SLS is to a certain extent considered may lead to harming their portfolio due to lack of capacity in doing SME lending. On the other hand the microbanks lending products have high interest rates and stringent collateral requirments. Microbanks are doing 100% secured lending meaning collaterals both cash and non-cash must fully cover the loans. Non-cash collaterals ranging from white and brown goods to titles deeds. Cash collateral ratios are 20% -50% depending risk perceived by the bank. Microcredit consumers are mostly from the informal economy and thus lending products and policies of microbanks are not reflective of the type of client they serve. 3. Consumer Behavior – Consumer behavior not studied may lead to institutions not designing/refining their credit product/policies to meet the market demand. From general observation customer are willing to pay for the lending service so long as their needs are met and they are able to repay. But when microfinance institutions are not responding to consumer demand and fine tune or review their lending products or policies it affects the demand for credit. 4. Macro Economic Landscape – The macroeconomic landscape of the country must be considered when assessing the demand for credit. From current observations, demand for credit is reducing due to the government cash flow situation and business climate. SME relying on government contracts are having difficult time repaying their debts with financial institutions. The operating cost is ever increasing and with a depreciating Kina, lending risk are being tighten, thus having adverse effect on credit demand. Whether it be for financing consumer needs or medical needs or school fee needs or micro-SME business needs, the need for micro credit is increasing. It is now up to the Policy makers and the players to ensure that microcredit market is demand driven and not MFI driven.

Well researched document. I agree since I worked with a Savings and Loan Society

Hi Peter, Speaking as someone who's worked in the aid world, the private sector, and local government I can tell you with confidence that almost everything humans do involves some waste. But, on average, aid is not egregiously wasteful. What's more, there's no guarantee that aid cuts will reduce waste. Indeed, some of the things that would make aid more effective -- better evaluations, more aid specialist staff -- would actually cost more. Charity already starts at home. Indeed, in Australia and most OECD countries that's where it basically ends. Only 0.84% of Australian federal spending is devoted to aid. It's true that some aid is tied in with foreign policy objectives (at least, this is true in the case of bilateral government aid). I campaign against this too. However, it's not true that all aid is. Moreover, simple political economy suggests that the type of aid that gets cut first is the type of aid Australia needs least -- the most altruistic aid. Cut aid, and you'll still have aid tied in with foreign policy. Increase aid, and you might create space for more altruistic aid. Terence

Jo I believe business is the key.. influence peoples lives through business cause it breaks down all barriers.. Yes funding 250 cows and expecting a meaningful outcome is fanciful.. best help those poor women.. The other way is allowing them to work in NZ in industry and educate them this way..

a great deal of aid money is a waste... its an industry and its time to review how its handed out.. charity always starts at home ... Too often Aid is mixed up with foreign policy ...

I think publicising any examples of where aid has been successful would help.