Comments

Thanks for your kind feedback and excellent comments, Paul. I think you could argue either way on most of them. 1. On predictability, my preference is counter-cyclical distribution (i.e. delayed payments), then a smoothed approach. Commodity cycle-driven payments are not ideal: not for the economy, certainly not for households. 2. I agree with in principle with you how intergenerational equity may be less compelling if there is future discoveries are expected, but I have reservations about dismissing it as a starting point because of uncertainty. There is a chance there may not be much more. With increasing pressure to move away from fossil fuels, it is not impossible that known and unknown reserves will significantly devalue and exploration slow (i.e., using all known reserves under BAU scenarios is expected to give a 10-15 degree increase in temperature). Demand for the commodity in question might slow and extraction lose its voracity, and it's easy to muddy intergenerational equity and current generational smoothing when we are talking about sometimes very long commodity cycles. I'm not sure what the right answers are, but think its a great discussion to have. Also, I really distrust the argument that by growing today future generations will for sure be richer. Assuming today's policy will work and make the future that much better is a bit like 'shooting from the hip', particularly if we are talking about PNG. 3. I have not thought in detail about issues around local support and land ownership, but they are no doubt important and have been raised with me before, including by some regular readers of this blog. Personally, I'd prefer national resource wealth policy centralised, as I imagine province and district based regimes have some perverse governance and spatial economic challenges. Maybe its possible to slice the issues apart (the land licensing and then what is below the ground)? 4. Is the first-best solution better governance? Of course. I don't have much doubt that a good SWF under perfect governance would be ideal. An SWF that distributes politically independent counter-cyclical dividend payments to offset commodity volatility would be even better in my view, but many will disagree with me on that. Extractive industries and extractive institutions (in various forms) go hand in hand though. As argued excellently in CGDs papers, directly bringing citizens into the process and broadening the tax base (as DDPs go into general revenue through income tax) might strengthen the social contract and increase accountability for good government more than any 'governance' interventions would. With the proliferation of mobile money in PNG I think this approach has great potential. In Australia, I certainly think that a new approach is needed to get any resource sector reforms past the mining lobby. I'm convinced a DDP-style approach, giving every citizen skin in the game so it is the entire population vs. the mining lobby (c.f., government vs. the mining lobby) and equal distribution (c.f., 'a big tax') has the best chance at doing this. Or perhaps the PRRT might just be extended to onshore assets without anyone noticing, but doubt this will be the case and there is still a strong case for a SWF and lots of proponents of one out there hiding in the shadows. Lastly, I just wanted to flag that Todd Moss and colleagues from the CGD have a new Oil-to-cash book coming out 2015, which will deal with a lot of these issues. Thanks again Ryan

Can you expand on using SWF to sterilize dutch disease? My understanding is that if you don't raise peoples' incomes, because you are stashing income away in overseas assets instead, then there is no DD to sterilize. That sounds like a semantic quibble buy really I'm asking whether you have some other mechanism in mind

Thanks Sam. A great post. I look forward to a 'further lessons learned' blog! Given how you outline WHO's funding shortfall, I was surprised you didn't conclude with a recommendation for Australia to increase its funding to WHO. Any reason for this? For the G20 and Ebola, the UN has an existing Ebola appeal for $1 billion, which is woefully underfunded. If wealthy governments can't even give $1 billion in a current crisis like Ebola, are they really going to give $20 billion for a health emergency response fund? At this point, the idea seems to me a distraction from the pressing task at hand - better to get the G20 countries to fully fund the Ebola response now. Although, I do like the idea of a health emergency response fund, but I wonder how practical it is. I can see the benefits of having money sitting there, ready to use. But on the other hand, this would be money sitting idle that could be spent on primary health and health promotion. And do we really need another fund for health? The sector is already burdened with a variety of funding mechanisms. In terms of the G20, there is no debate that health and human wellbeing are integral to functioning economies and development in general (as you've argued elsewhere), so there is no reason why the G20 members can't commit to putting more money into health and examining other issues, such as trade, through a health promotion lens. Owen Barder had a great post about the need for more investment in health, in relation to the Ebola outbreak: http://www.owen.org/blog/7435. The G20 prioritising health is the sort of commitment required to prevent infectious outbreaks and deal with the slow-burning NCD crisis.

Tenkyu tru, tupela. Most enlightening. Personally I don’t trust, “trust” funds in PNG as they seem to be a place to park funds until everybody forgets they are there. If they are ever expended for the designated purpose is anyone’s guess. Not to mention if they achieve value for money. Take your point on how they and the other factors influence the reporting and bottom line, though. Thanks very much. Understanding data and trends in PNG must be an economist’s equivalent to the art of herding cats! But I suppose that is the same in many other countries. The big picture still seems heartening for PNG. A little like a guesthouse in an under-discovered tourist heaven that knows if it spends on infrastructure and new capacity for a few years (read LNG/mining) it will be fully booked and earning good income for another 20 years or so. Nice! Paying back the investment cost with the early earnings will impact on any initial surplus, but still be a good thing in the long run. And they might even build another guesthouse or two along the way! As long as no-one burns them down, of course. Intangible, unpredictable and indirect benefits and impacts of a general confidence in the economic future, even over 2015 before the income starts flowing (the spending already has!), may also be interesting to observe over coming months. It is certainly a more optimistic outlook than many other parts of the globe. It seems understated that over the past 8 years or so while most of the rest of the world has been sweating over their finances, PNG has been quietly booming … with more to come. Plenty of waste and mismanagement, no doubt - but still moving forward. Plenty of problems to manage – Dutch disease, how best to spread the love etc. – but good problems to have in these times and for a country only 38 years into nationhood. Look forward to reading more of your articles and insights. Thanks for responding to my comment, I learned something.

Great reading, also "The Three Delays" essay. Currently in South Sudan, locked in battle about the provision of an ambulance at county level for "referral"", where "referral pathways" do not exist. I am sharing this with my county teams and other partners.

Richard, as you comment, under-spending of planned budgets can have significant implications. Under-spending in planned budgets can lead to several outcomes in PNG. First, the under-spending can be recognised as simply a timing issue in a multi-year budget. If there have been delays in getting a project going, this should simply shift some funding in future years. This was one of the aims of the introductions of multi-year budgeting in 2012 - to reduce the pressure on the end-of-year spend-up typical of annual budgets. Such a re-allocation will reduce the deficit. Second option is the end of year reallocation process (called the "Close of the Accounts" in PNG). Under-expenditures in some areas are moved to over-expenditures in other areas. This has no impact on the deficit. Arguably, the moves between appropriations are not very transparent in advance and certainly not subject to Parliamentary approval. Possibly this process should be more limited. Thirdly, known under-expenditures can be transferred to a trust fund. This occurred in 2013 where significant under-spends were reallocated to the South Pacific Games expenditures in 2014 (some K386 million) through a "Supplementary Budget". Under PNG's current reporting system, this is treated as expenditure in the year the funds are put into the trust account (2013 in this case) and so does not reduce the deficit even though the funds are not actually spent until 2014. This will change as PNG moves from the 1986 to the 2001 Government Financial Statistics reporting requirements when payments into trust funds will not be counted as expenditure. Finally, some of the "under-expenditure" can be based on whether certain financial transactions are regarded as being counted "above or below" the line for determining the deficit. For example, PNG was required to spend K305 million in 2013 to keep its equity share in the PNG LNG project. As this is simply the purchase of equity in a project, some argue that it should be treated as a below the line transaction (a capital financing event that doesn't affect things such as the delivery of services). The PNG treatment of this changed three times during the last year. The rub is that if such equity purchases are treated above the line, then the PNG's OilSearch purchase should also be treated above the line. This would blow the 2014 deficit out by more than a billion Kina. If it is treated below the line, then for consistency, asset sales should also be treated below the line. This would mean that possible sales of parts of Air Nuigini and PNG Power should not be counted as helping with the program of reducing the deficit in 2015 (although it will help reduce the level of debt). These types of decisions on how to report various types of spending, and the importance of consistency, will be important for really understanding the 2015 budget.

Ryan. This is an excellent analysis. I think your suggestion of some form of hybrid that combines the macro-economic stabilisation elements of a SWF with the direct dividend approach is a minimum variation to the DPP idea. Four further questions. First, are households better off (and the economy) with a relatively predictable and steady stream of annual dividend payments, or should they accept the volatility of usual mineral resources incomes? Mineral prices are volatile - so a straight payment of the ups and downs of annual profits through dividends could lead to considerable volatility in household incomes. Second, if the resource wealth in a country is considerable with the likelihood of new discoveries and enhanced ability to extract existing ones, the need for inter-generational equity is diminished. In the case of Norway and Timor Leste, the concern is that the existing discovered petroleum fields may be the richest in their area - so using them now for the next generation means the next generation will not have that type of wealth anymore. However, in countries such as Australia (with some minerals expected to last for hundreds of years at current rates of extraction) and the likelihood of undiscovered mineral wealth in PNG, the inter-generational argument may be less compelling. Third, on the politics, how does the proposal deal with the special interests of local landowners? Any sustainable scheme would suggest they may need more dividends to continue local support for any mine. Finally, in the case of both Australian and PNG, is the first best solution to improve governance? Thanks again for raising such an interesting idea.

Thank you for the pointers set out above. it will be as you said, interesting to see if the above issues highlighted in your article have been included as they ought to be. i will be very interested to follow up on your views on the budget. Thank you, Johnny

I don't really understand the Aid Transparency Index scoring either Robin. What I do know is that in June 2014 DFAT commenced its quarterly reporting for all partner countries, prior to that I don't think they covered all countries and the updating was much less frequent. They also began identifying the sector for each activity. These three changes: coverage of all countries, quarterly updates of all new transactions and sector coding have now made this information much more useful. It will be even more so when regional, multilateral and other government department funding is included. I understand that DFAT hopes to have these added over the next 12 months. Now that the data is being regularly published hopefully it will also be available on the DFAT website in an easy to access form. There are certainly good models on other aid agency websites that could be used (eg the UK and Canadian government aid agencies). Given the lack of clear links to the IATI data on the DFAT and IATI websites it took me quite a while to find the IATI datastore query page. The people at IATI tell me that they are in the process of fixing their website.

Thanks Garth. Though the same type of information is available from the OECD Development Assistance Committee's <a href="http://stats.oecd.org/Index.aspx?datasetcode=CRS1#" rel="nofollow">Creditor Reporting System</a> (CRS), the IATI information on individual activities accessible via the link above has the considerable virtue of much greater timeliness. CRS data are run through quite the mill, and so far extend only as far as 2012 for Australian aid activities. However, I am unsure how it can be the case that (a) the quality, coverage and timeliness of Australia's activity data reporting has markedly improved in 2014, and (b) Australia's Aid Transparency Index score for transparency in the publication of activity-level information has actually fallen a bit in 2014. As noted above, the data collection period in both years was April to June. I assume there was not a sudden improvement from July 2014. Something needs explaining here: either the data were actually about as good in 2013 as they were in 2014, or the Aid Transparency Index was unfair to Australia. A further observation is that the pointer to activity-level data which you provide above is nowhere provided on DFAT's website. At present, with a little persistence, you can find your way to <a href="http://aid.dfat.gov.au/Publications/web/statistics-data-2012-13/Pages/aus-aid-data.aspx" rel="nofollow">this</a> page about aid statistics on which it is stated only that 'Australia reports annually its development assistance to the DAC ... This includes statistical information at the activity level, which can be accessed through the DAC’s website'. There follows a link, not to the CRS, but to the DAC's general website. <a href="http://aid.dfat.gov.au/aidpolicy/developmentpolicy/Pages/iati.aspx" rel="nofollow">Elsewhere</a> on the DFAT website you can read that Australia will 'fully participate' in IATI, and you get a link to the IATI website but not directly to the IATI Datastore -- and the link to the Datastore on the IATI website is, today at least, broken. Clearly DFAT's website should prominently display a direct link to it, or some similar portal which processes and displays IATI registry data.

Robin, I agree with you that Australia appears to have gone backwards generally in its transparency around aid. This seems to be a most unfortunate situation given the Government's intention to improve the accountability and effectiveness of the aid program. However in the last six months DFAT has improved the quality, coverage and timeliness of activity data reported to IATI. For the first time researchers can now obtain a fairly comprehensive and up-to-date summary of all DFAT funded activities that are allocated to a specific country. At this stage regional, multilateral and other government department funding is not included, but I am told by the ODA Statistics and Reporting Section of DFAT that this is in the works. Data is updated about 8-10 weeks after each quarter and is complete for that quarter with some data beyond that. The most recent data is complete to June 2014 and goes back two to three years. The easiest way to access this data is probably to go to http://datastore.iatistandard.org/query/index.php and select the option: one transaction per row - a transaction is a payment made for an activity. This contains all the data currently recorded for each activity with the exception of the total planned expenditure for the activity. This total expenditure can be obtained using the one activity per row option. I am happy to help anyone if they need a hand to get up to speed with this.

Thanks for this article, you make some excellent points. Worth clarifying however the following line - 'Infectious diseases, until now, have been our greatest health challenge.' with reference to data from the <a href="http://www.healthdata.org/results/country-profiles" rel="nofollow">Global Burden of Disease country reports</a> we can see that non communicable diseases have, at least in some parts of the Pacific, been the dominant cause of death and disability for several decades. In Tonga, for instance, at least as far back as 1990 heart disease and diabetes were already the top two causes of premature death, and stroke came in at number 5. A similar pattern can be sen in Fiji. Samoa is an interesting example - in 1990, lower respiratory infections were the #1 cause of premature death, but stroke, heart disease and diabetes were 2nd, 3rd and 4th. In 2010, diabetes was clearly out in front. In the Solomons, the trend you mention is more clear:in 1990, lower respiratory infections and diarrheal disease were #1 and #2, but by 2010 had been overtaken by diabetes and stroke. This trend was also evident in smaller nations like FSM. In Papua New Guinea, 7 of the top 8 causes of premature death are communicable, maternal and neonatal conditions, though diabetes has increased dramatically and is ranked #2, and we can see indications that in the longer term NCDs will continue to rise. One reason I think these details are important is that they show just how slow health ministries in some countries and donors have been to come to grips with the demographic transition and rise of NCDs, and the health systems responses that are needed. It's important that the DFATs and DFIDs of the world understand that NCDs aren't the 'Johnny come lately' of the global health scene, and that strategic, long term prevention and health systems responses are needed if they are to be effectively addressed.