Comments

Hi Richard Thanks for this thoughtful response. I agree with you entirely hopefully this being a wake-up call to diversifying the economy. Getting more significant improvements in areas such as agriculture and fisheries and tourism are vital. And we know that will take a combination of good macroeconomic, good microeconomic as well as other social, gender and other supporting policies to achieve. There is a chance that some part of the forward contracts were locked in at a price that isn't subject to spot fluctuations. However, given the extent of the price drop, even some of these contracts are under pressure according to reports (such as reports of Sinopec looking to move out of some of its LNG contracts). There will be fluctuations in prices, but the market now expects that the oil price will only slowly improve from current levels (so around $US66 per barrel by 2019). There are some analysts that predict a price of around $US40 (the long-term average price is around $US50). Other analysts say a return to US$80 per barrel. My general view when it comes to revenue forecasting is that people can make their private predictions. If they wish, they can then use their private money to bet against markets (which are very well informed in such an important market as oil). When it comes to use of public money, it is best to keep with a sound judgement based around market expectations. So that is why I've based the analysis on futures market prices (from the New York exchange). On the exchange rate, there are winners and losers, so the adjustment will be difficult. The costs for those with large loans is one factor, but so is the significant loss of incomes for smallholders (see earlier blog about 130,000 coffee growers dropping below the poverty line). Businesses are facing significant delays in getting foreign exchange and this is lifting their cost which will also affect consumers. The current exchange rate policy is deterring investment and making PNG less internationally competitive. PNG was doing well some 18 months ago with a market related exchange rate - time to go back there. Thanks for the comments. I do hope the blog will stimulate a healthy debate in PNG, both to deal with the short-term challenges as well as its longer-term challenges such as diversifying the economy.

Golly Paul, you’re scaring the kids. With good reason I guess. Just some reflections on your note … Wouldn’t 2015 (and perhaps beyond) LNG export contracts already be in place with prices fixed therefore lessening the short-term impact of the drop in prices? Might be wishful thinking on my part but I’m guessing/hoping the LNG bosses consider these risks somewhat in their forward planning. Are you predicting no more external shocks affecting the price of oil one way or the other over the next 5 years? Your price graph looks pretty steady. Looking at the oil price retrospectively over the past five years shows it to be pretty erratic. Will OPEC continue to ply their price war? Will there be no trouble in the middle-east or elsewhere impacting on price, or announcements of “peak oil” – we are still dealing with a non-renewable resource in a world with an exponentially growing middle-class. I believe quality of gas is a price and sales factor, too – with PNG producing high quality. Perhaps production can be bumped up, too. All things that may change the situation. Maybe. Although predicted depletion of foreign reserves is dire, I’d be worried about some of the remedies, too. Without really knowing the extent of the country’s loans (except that they are BIG) and their conditions, perhaps a lower kina – against a strengthening US dollar -will cause big problems with loan repayments. And the millions who now rely on store goods will find their pay packet buying less. Hopefully there are other ways. This is certainly a(nother) wake-up call to policy makers to do something major by way of diversifying the economy and supporting agriculture, tourism and fisheries industries and the like in PNG to flourish. All of them with just as much potential as extractive industries and employing far more people. Just need the innovation and human capital to get it going. And the infrastructure. With the Oz government’s stated aim of engaging more in economic partnerships rather than direct aid, perhaps there are some opportunities for government incentive for agricultural enterprises in Australia to team up with PNG enterprises. There must be a wealth of under-utilised skills/knowledge and equipment down south, with seasonal crops and other seasonal factors. It might make some properties viable if they had a northern partner. The north paddock, so to speak. Just a thought. Same could be said for joint tourism and fishery ventures. Not much seems to be happening to develop skills and infrastructure around PNG in these areas, so perhaps this writing on the wall can be heeded. Quickly. Thanks Paul. I'm glad we have such analysis. We don't find it in the newspapers here in PNG.

Great, how can we stop corruption in PNG???

Yes, I agree WHO is not fully to blame for its shortcomings. And I do think that the criticism based on the slow Ebola response has been excessive. But even given all that, I would like to think that after 65 years, supporters would be able to raise more than the normative role and the Framework Convention in the list of achievements / arguments on why WHO is needed. Gostin always does the same as do many others. I think those who support WHO need to show more evidence of success beyond one Convention and a normative role that means little if it is reactive, behind-the-times and inefficient. OK, that's my WHO rant for the day. I do take your point and Ben's point that the G20 represent money and leadership and therefore might be a good mechanism for action and advocacy.

Hello, does this monster budget cut affect Australia's newly mobilised Facilities?

'The effect of transnational media advocacy on justice systems strengthening: lessons from the United States'.

Perhaps a panel at the aid conference to discuss their merit 🙂

I've given in to peer pressure and downloaded them as well - let's reconvene in January to see whether the raving is justified

Thanks Ashlee, I don't want to be seen as encouraging Jonathan's raving, but I've downloaded all the Serial podcasts to listen to over summer too.

Thanks for this Terence! If others have suggestions I reckon they should jump in here in the comments. For those who want to dive into some fiction that cuts close to the truth, this year I read 'A Fine Balance' by Rohinton Mistry, recommended to me by Stephen Howes after I <a href="https://devpolicy.org/in-brief/behind-the-beautiful-forevers-insights-into-poverty-20131023-1/" rel="nofollow">reviewed 'Behind the Beautiful Forevers'</a> last year. It was a great (but depressing) read that starkly highlighted the problems with any kind of 'development' that doesn't consider the rights and experiences of the poor. My favourite book this year has been 'Americanah' by Chimamanda Ngozi Adichie. While partly set in Nigeria, it's not really development-related, but for those interested in the non-economic side of migration and development, or interested in issues of race and class in developed countries and developing countries with an emerging and growing middle class, then it provides some real food for thought. My plans for the holidays include reading 'Indonesia, etc.' by Elizabeth Pisani (which gets rave reviews from my fellow Indonesianist friends, though I can't speak to it personally yet), properly reading <a href="http://www.thelancet.com/series/violence-against-women-and-girls" rel="nofollow">the series of articles</a> published in <em>The Lancet</em> in November on gender-based violence (depressing perhaps, but more worthy than binge-watching episodes of trashy reality shows, which will probably also happen during the holidays). And I'm also planning on reading 'The Mountain' by Drusilla Modjeska, which Tess Newton Cain <a href="https://devpolicy.org/the-mountain-by-drusilla-modjeska-essential-reading-for-png-enthusiasts-20140701/" rel="nofollow">reviewed</a> earlier this year. I also need to listen to the NPR podcast 'Serial' (non-development related!), which Jonathan Pryke keeps raving about!

Thanks Ben and Joel. I agree with you both about the over-crowded global health architecture, but tend to disagree with the idea of scrapping the WHO - i think with proper funding, staffing and mandate, the WHO has the potential to add order to the chaos of global health. And I'm a supporter of its normative role, like leading development of the Framework Convention on Tobacco Control. I'd agree that, with a few exceptions, it hasn't lived up to its potential, but i think at least some of the reasons for that are outside of its power.

Thanks for a thought-provoking article. Agree the global architecture is extremely crowded; the central problem is that it is crowded by actors with limited political influence. Forums like the G20 are critical mechanisms to build on a tecnical agenda set by the actors Joel mentions, with financing and leadership. The way in which the Ebola debate is coalescing around neglected health systems is, despite the horrific crisis, encouraging for the long term. Link that to an increasing interest in global health security, and we have the potental for a powerful combination of leadership, financing and the political clout of large nation states. At this stage unfortunately, potential only.