Large-scale resource extraction – mining, logging and LNG – have left most people in PNG much worse off than before
Re-opening Panguna will mean the same for Bougainville
Radio New Zealand | 6 June 2017
An economist says Papua New Guineans have lost nearly half of the economic power they had in 1980.
Paul Flanagan, from the Australian National University, has worked in PNG and studied the economy for many years.
He says the focus of successive governments on resource development has brought few gains for the people.
He says the average Papua New Guinean’s economic wellbeing has fallen dramatically since 1980.
Mr Flanagan spoke with Don Wiseman who began by asking him to define the term ‘economic wellbeing’.
Coastal village of Hanuabada, adjacent to the CDB, in Papua New Guinea’s capital Port Moresby. Photo: RNZ/Johnny Blades
PAUL FLANAGAN: In this particular case the specific definition is using the size of the non-resource part of the economy and putting that in per-person terms. So it is non-resource GDP per capita. This is the best attempt to try and evaluate essentially how an individual’s ability to purchase goods and services has changed from 1980 to 2017 and that number is a very worrying minus 40.4 percent.
DON WISEMAN: And in real terms that means what for your average Papua New Guinean?
PF: There are obviously distributional elements there. Some people in areas of Port Moresby would have done very well since 1980, but on average, across the country as a whole, it means people in PNG are able to buy less goods and less services relative to 1980. They have gone back by 40 percent in real terms.
DW: And all of this is because of this pre-occupation, since independence, with developing resources, or bringing people in to develop resources.
PF: It is the different path between the resource sector, which has done extra-ordinarily well and the non-resource sector, which has gone back so severely. One thinks that the reason for that is the policy emphasis towards the resource sector – favourable taxation policies, favourable decisions as to where to put infrastructure, just the time and energy of the government is going too much into great big resource projects, and not enough time on the smallholder projects that are good for coffee growers in the Highlands, support small sized businesses in areas such as retail trade and that. Too much focus is going on the big projects, not enough on those smaller projects that would really benefit the people of PNG
DW: And the people with their land – this is actually the true resource of PNG as you see it?
PF: It is the land. It is the extraordinary beauty of PNG, the untapped tourism potential of the country is extraordinary also, but the real resource is the people themselves and educating them better, having them more able to engage with the Asian century, being able to tap their potential, that is the area of development policy that is really missing at the moment.
DW: Successive governments have gone for resource development because it’s seen like easy money, isn’t it?
PF: It does almost seem as if it is money growing on trees and some of the figures we have heard from the current government, and their estimates of just how much the ten of billions of dollars they would be talking would be coming through on tax revenues, therefore they could go and do things that led to massive increases in expenditure back in 2013, 2014, – it does seem like very, very easy money. The real inclusive elements development tends to be a much longer path. It will often take five to ten years to start seeing results of those type of micro-economic changes that really unleashes the potential of people. We saw that during the 2000s, and some of the hard work that was done and the turnaround of the economic mismanagement of 1998/99, but that took a good five years before some of the benefits started being seen from those changes in policies. So it is pretty tempting for a politician to go for those easy money on trees rather than that really hard work on micro-economic reform to build a more inclusive development.
DW: In your report you have some focus on Bougainville, and Bougainville of course has experienced the highs and the very deep lows as a result of this focus on resources, but they are trying to develop their economy now and it is still this focus on resource development.
PF: That’s right. There are so many options and so many elements that make for successful development. And there isn’t a simple silver wand that will allow one policy of government to change that will lead to a more inclusive type of development. Bougainville is a care – incredibly complicated, institutions are weak, infrastructure is weak, there is still a lot of social issues there to actually be dealt with, including gender issues, to actually build up a more inclusive pattern of development. But to the extent to which the focus moves on ‘just let’s re-open the mine and that will save Bougainville’ that will be a very worrying, tempting, but very worrying pass for Bougainville to go down.
DW: Going into the election and it is in just a couple of week’s time, do you think what we have heard from any of the political parties is going to lead to a different direction if the [Peter] O’Neill government doesn’t remain in power?
PF: Well I think there are. I mean it is obviously a very broad range of parties that are standing. Quite a few of them are talking about more focus on people. They are talking about things such as changing the tax concessions that might be available, they are talking about re-orientating the big project expenditure on the big areas such as APEC. Some of the parties are talking quite openly about ‘ We can’t afford that sort of thing – we need to put the money back into health and education – these are the priorities’. So there is a great range of policies. What I am hearing from some, and of course the former prime minister [Sir Mekere] Morauta who did help with things back in 1999/2000, are putting up policies, which once again, do suggest sensible approaches to economic repair, bringing in international partners to assist with that and getting the focus back on track for a more people focussed development. You see that also in Pangu Party in some ways, the people they have there, in dealing with institutions and dealing with corruption. There are I think some good alternatives there but obviously the O’Neill government has enormous power in being the encumbent, so the chances of change are very uncertain.