In Papua New Guinea, no province outside of Bougainville has pushed harder for autonomy than New Ireland. Since signing a service delivery partnership with the national government to begin the autonomy process in 2018, New Ireland has developed a framework for political, administrative and fiscal autonomy which it intends to present to the national government. However, a disagreement over royalty sharing between the three most powerful people of New Ireland – its provincial member of parliament (MP) and two district MPs – threatens its autonomy aspirations.
Provinces draw upon five revenue sources to fund the services they provide: Goods and Services Tax (GST), bookmakers tax, royalties from resource projects, own-source revenues, and dividends. Unlike many other provinces, New Ireland has two gold mines: the large Lihir mine and the smaller Simberi mine. It has historically been dependent on mining royalties for a majority of its revenue. By law, mines are required to pay 2% of the gross revenue of resource sales directly to landowners, local level governments (LLGs) and provincial governments. While Simberi pays royalties only to LLGs and landowners, Lihir pays royalties to landowners (20%), LLGs (30%), and the provincial government (50%). Between 2007 and 2020, the New Ireland provincial government received on average K42.5 million annually in real royalties, accounting for three-quarters of its revenue.
In 2021, the MPs representing New Ireland’s two districts (Kavieng and Namatanai), both influential ministers, successfully lobbied the national government to divert 80% of the provincial share of royalties to the districts. By law, districts are not entitled to receive royalties and this marked the first time a resource project royalty-sharing agreement was amended to include districts, setting a dangerous precedent. With the change, royalties to the province have been split three ways: 40% to Kavieng, 40% to Namatanai and 20% to the provincial government. As a result, by 2022 real royalties to the New Ireland provincial government had fallen 83% below the 2020 level, following a steady increase between 2014 and 2020. New Ireland’s total revenue has declined in line with the fall in royalties which has forced the province again to be dependent on national government grants.
Diverting royalties to the districts is problematic because district authorities are ill-equipped to deliver services, and the weak governance surrounding District Services Improvement Program (DSIP) funds has enabled the misuse of these funds. New Ireland’s districts are likely no different, given Kavieng has failed to acquit its DSIP funds since 2016, while Namatanai has failed to acquit its DSIP funds since 2019.
The New Ireland provincial government hasn’t performed well in governance either, failing to acquit Province Services Improvement Program (PSIP) funding since 2013. Another governance indicator that can be used to assess governance in the provinces is the National Economic and Fiscal Commission’s (NEFC) budget quality scores. According to the NEFC, New Ireland’s budget quality deteriorated from a high 76.5 in 2013, to having the lowest score of any province at 7 in 2018. Clearly governance needs to be improved before New Ireland is considered for autonomy.
The deterioration in the quality of provincial governance and the change in royalty sharing arrangements have not dampened New Ireland’s aspirations for autonomy. Its fiscal autonomy framework proposes additional revenue raising powers, including through its own tax office which would collect GST, company taxes, personal income taxes, and customs duties. New Ireland also seeks to be granted the ability to set its tax rates and capture a greater share of the resource revenues currently received by the national government. It is, however, unlikely that New Ireland’s proposed fiscal arrangements will be granted, given company tax, personal income tax, and resource revenue are important sources of revenue for the national government.
In 2022, the latest year for which revenue data are available, New Ireland’s revenue was able to meet only 47% of its operational costs (staff salaries and service delivery costs). As the table below shows, New Ireland’s revenue came from GST, own-source revenues and royalties. Fiscal self-reliance, however, is possible if New Ireland returns to the original royalty-sharing arrangement, and if all its GST is remitted (instead of the 60% currently remitted). In fact, if GST and royalties were completely retained, in addition to own-source revenues, New Ireland would be able to meet all its operational spending needs and enjoy a 13% surplus.
It would be more realistic for New Ireland to base its autonomy aspirations on royalties and GST given that these are two revenue sources to which it already has partial access — rather than asking for access to sources to which it currently has no right. However, for this financing pathway to be viable, there needs to be consensus among New Ireland’s political class that provincial autonomy is a shared goal and that royalties belong with the province rather than the districts. And New Ireland needs to improve its financial management. Until then, demands for more autonomy will ring hollow.
Disclosure
This research was undertaken with the support of the ANU-UPNG Partnership, an initiative of the PNG-Australia Partnership, funded by the Department of Foreign Affairs and Trade. The views are those of the author only.
Autonomy is the only solution for New Ireland under the current circumstances and moving into the future if it is to fully maximise its potential as a prosperous part of PNG.
The more educated people in New Ireland and to an extent PNG become, the more informed they are about the current flawed system of governance and mechanisms on how wealth of a province is distributed.
Fun facts about New Ireland:
– New Ireland is certainly in the top 10 revenue generating province of Papua New Guinea.
– Due to its low population density and few seats in parliament, NIP usually gets the lowest annual budget from the national government normally second last or third last. This is disproportionate to the revenue it contributes to Papua New Guinea which is very unfair for anyone.
– New Ireland is the largest province in Papua New Guinea in terms of its geographical coverage (land and sea), the second one is Western Province. Most tuna and other fish caught in the waters in PNG for large commercial enterprises are caught in the seas of New Ireland due to its breeding ground for tuna, yet this does not translate to monetary gains for NIP.
Papua New Guinea obviously will find it very difficult granting autonomy to NIP as well as ENB as it is like “killing the goose that lays the golden eggs”. It will have significant financial implications to PNG.
However the slow the process is with internal and external challenges; New Ireland Autonomy is inevitable with strong sentiments in the province for this noble cause. If the old veterans like Sir Jay and Dr John Momis are advocating for strong autonomy and decentralization, that is a tree planted so to speak. Once an ideology is given birth to, it will not die out regardless of how much effort people will try to use to undermine it. Just few weeks ago from this comment Dr Momis again emphasized the idea of decentralization of powers back to the people for fair democracy and participation in the democratic process. Watch the full video here: https://youtu.be/qeosOGM2vp0?si=a52gwhZCsqVMnbKG
Concerning the NEFC report on the status of New Ireland Province, it is very sad to know that we scored the lowest. However, I think we deserve something better as we continue to contribute more to the National Budget than any other province in this country.
Thanks for sharing this and I agree with this arguments presented in this paper. As a New Irelander there need to be a change in the Leadership comes 2027 if the Province’s quest for autonomy is to be fully realized.