Time to consider abandoning the “Service Improvement Grants”

By Busa Jeremiah Wenogo

Joe Sungi’s blunt response to why MPs are not interested in toppling the O’Neill-Dion Government[1] gave us an insight into why DSIP, PSIP and LLGSIP grants are now seriously undermining good governance in this country. It is no longer about MPs using their conscience above all else to make decisions on the floor of parliament to advance the nation’s interest. Instead it is really about securing the DSIP and PSIP money to implement projects in their districts and provinces. While service delivery is a primary responsibility of our elected leaders they are to be reminded that they are foremost legislators tasked with the responsibility to make and pass laws that are in the best interest of our country. The public servants who they have unfairly criticized for not delivering are the “engine of service delivery”. These are people whether one likes them or not employed by the State to be “implementers” and not “brief case” carriers.

In saying the above the introduction of DSIP was purposely to improve the delivery of services in the districts. Yet systems and processes of accountability have always been a teething problem. Administrative guidelines and financial instructions are not being adhered to as per the Public Finance Management Act. As such the current review on the Public Finance Management Act needs to “tie the loose ends” to ensure that these “public funds” are properly utilized and reported. Unlike the District Support Grants like the Discretionary and Non-Discretionary funds which are constitutional grants as per the Organic Law on Provincial & Local Level Government (OLPLLG); DSIP, PSIP and LLGSIP for that matter were created by an NEC Directive. This means that the Prime Minister and his NEC colleagues ultimately make decisions regarding its disbursement. In this regard Mr. Sungi’s comment is a testament to this unfortunate reality.  

Most MPs don’t see the necessity or importance of providing acquittals on time eventhough this is a key requirement to be eligible for the next lot of funding.  For most of them DSIP is a “political money” given to them for their loyalty to the government of the day. Afterall it’s a “numbers game”; a well-know adage in our parliamentary system of democracy. Governments are made and broken by the movement of MPs on the floor of parliament. Subsequently the ruling government is prepared to allow “rogue MPs” to continue accessing their DSIP so long as they pledge allegiance to them. On the flipside; the government is even prepared to suppress any opposition by withholding DSIP funds from their opposing MPs (Opposition MPs). Subsequently, the government’s use of the DSIP money to muster or bolster its numerical strength to hold onto power is undermining the strength of the opposition and parliamentary democracy as a whole. The MPs on their part know that the government needs their support to pass the national budget or important bills. They are prepared to be “bought off” with those DSIP funds. It is now becoming a common practice that the very first thing that most MPs look out for in the budget book is the allocation of DSIP. Such practice is becoming a norm that no wonder MPs don’t properly debate the details of the budget and are prepared to vote for a budget they have never thoroughly analyzed. Now that the government through its Finance Minister has announced that DSIP Funds for all provinces have been slashed to K1 million[2] it will be interesting to see the MPs response during the current parliament session.     

Another interesting observation is that this statement from Mr. Sungi seemed to indicate that MPs are “free riders” not willing to use their experience and knowledge to explore alternative means to advance the delivery of services in their districts. If this is so then this is a major slap on the face to their constituency. For instance, MPs have the opportunity to explore counter-part funding arrangement with donor partners to initiate community projects yet this is hardly the case in most districts. It seems our political leaders are more interested in putting up grand projects that can only be afforded by the DSIP Money and can yield “kick backs”.   

In the past we had problems with money but the processes and systems of governance governing the use of those funds were far more effective than today. The situation today is a total contrast to those former years. A “golden decade” led initially by the booming commodity prices and then the PNG LNG Projects have created a pool of funds that can boost service delivery in all our districts. Regardless most of the districts in the country are still the same prior to the introduction of the DSIP. Makes you wonder why the government decided to create PSIP for the provincial governors. This warrants the people of this country to reconsider the impact of these “Service Improvement” grants. It’s obvious that the people need to now demand the government to remove this program all together and instead call for the government to channel money earmarked for service delivery through the normal budgetary process. Through this funds can be properly tracked and put to use for its intended purpose and not be at the discretion of the ruling government to advance its own political agendas.       

  

---

[1] http://www.looppng.com/content/dsip-funds-keep-mps-intact-pm-o%E2%80%99neill-says-sungi

[2] http://www.looppng.com/content/district-funds-slashed-k1-million-only

The present state of our economy is anyone’s guess

By Busa Jeremiah Wenogo

The health of the PNG’s Economy has lately come under intense scrutiny that it is hard to overlook the economic data that has been circulated in the media. The government through the Department of Treasury and Central Bank has brushed aside claims raised by some critics such as Sir Mekere Morauta that the economy is “heading for doom” and urgent intervention from the government is required to keep the economy afloat. However, developments on the ground is increasingly portraying an economy that is in dire need of urgent stimulus to stay afloat until the prices of key commodities pick up again or new projects comes on board. News of the government slashing funds earmarked for priority areas such as health and education, difficulty in the payment of public servants’ salaries and rental bills for offices, increase levels of domestic and international borrowings and government scampering across the world to secure additional funds to support its budget and address the foreign currency crisis are raising fear of the health of the economy.     

In a country where data collection has been a chronic issue for the government any economic data that gets spurn around in the media will no doubt generate skepticism. In addition, government’s tight control on the release of key information concerning the economy (and its budget) will always raise question mark about the economic information that it puts out on public domain. Information like the Mid-Year Economic & Fiscal Outlook Report or the Quarterly Monetary Statements produced by Treasury and Central Bank respectively have always served as an important information outlet. Lately it seems these data have increasingly strayed from the reality on the ground raising questions about the authenticity of this information. Bearing in mind these limitations; I would like to provide my own analysis of the state of the economy and offer my predictions on the future of PNG’s Economy relying heavily on observation rather than statistics given I am not privy to any “inside information”. My believe is that regardless of what is portrayed by the economic data the day to day struggles felt by the private sector and citizens in general are true reflections of the underlying problems that are affecting our economy. Observing these realities or phenomena provides insights into the state of our economy beyond the numbers that are thrown our way. For a lot of developing countries such as PNG a positive economic outlook does not often translate into improvements in social development indicators. Case in point are the impact communities of numerous petroleum and mining projects in the country whose lives have not seen any drastic changes.        

Exchange Rate and BOP

BPNG Governor’s claim that current Balance of Payment is sufficient to cover import for 10 months can be challenged on the following grounds;

      1)   There is currently a long queue of back-logs in import demands and

      2)   The depreciation of Kina against the US Dollar although the Kina has been pegged against the $US Dollar. Continued depreciation of our Kina (while being pegged against the US Dollar) could mean that the Foreign Reserve held by the Central Bank is not adequate to maintain the rate at which the Kina is pegged. The Foreign Reserve is being depleted due to various factors as will be outlined in the next paragraph.

Subsequently BPNG has advised the government to seek financing arrangement outside to address this problem.  To dispel confusion in the minds of the public BPNG need to provide details of the total unmet import demands (back-logs). The absence of such information is raising speculation and fears among the public.     

The back-log of import demands was stimulated by BPNG’s intervention in the foreign exchange Market when it imposed a trading ban in an attempt to stop the outflow of foreign currency. The Central Bank was of the view that “unauthorised traders” and the creation of “VOSTROS” Accounts were responsible for repatriating “foreign dollars” out of the economy. Yet given our current predicament it would seemed that this measure was too late to stop the plight of our foreign reserves. Importantly, this indicated that our foreign reserve level was already decreasing and the implementation of the said ban was to stabilize the foreign reserve. This may have stemmed the outflow of the foreign currency from our reserves but the problem is still persisting. The only other hope is for the commodity prices to pick up so that we can build up our foreign reserves. However, reports have predicted that it would be another 6-12 months before the prices pick up again. This means that what happens now until then is important to the health of our economy. So what could have caused the unexpected drop in the foreign reserve?

     1)   PNG’s rapid private sector investment means that demands for import increased rapidly.

     2) The government securing multiple international loans meant that it was repaying those loans in foreign dollars. For example the controversial UBS Loan.

     3)  Fall in commodity prices no doubt affected our exports; meaning less foreign dollars were coming into our economy to boost up the foreign reserve level.

The above factors caused an imbalance between the inflow and outflow of foreign currency on the currency market leading to a back-log in unmet import demands. This is causing our Kina to depreciate/slide against the other foreign currency (fall in Kina value) given that we don’t have sufficient foreign dollar to buy back Kina (on the foreign exchange market) to put an upward pressure on the Kina to rise against the other foreign currency such as the US Dollar. At this point importers will pay more to access their imports. To cover their losses they would then pass the buck to the consumers who would then experience an increase in the prices of goods and services. On the export side, the continued stagnation in the global commodity price means that although our exports (mineral, petroleum, and agriculture) can take advantage of a falling Kina; the fact that demand has dried up at the global market means that we will be receiving much lesser foreign dollars from our exports compared to the flush period.

In an attempt to address the back-log but at the same time stabilize the available foreign reserve and subsequently the value of Kina; it was revealed by the Prime Minister during question time in parliament that Central Bank is only prioritizing import requests from 3-4 major importers. This means that only certain amount of import demands will be processed. The backlog is still there. In addition the Central Bank’s advise for the government to explore international financing arrangement to clear the back logs has hit a wall given the recent downgrading of our credit ratings by the international credit rating agency. Thus from now on we will be borrowing against a much tougher credit condition until our credit ratings improve. Financing institutions will impose tougher conditions to minimize their exposure to risks such as loan defaulting. However, as mentioned earlier on this will only bring in temporary relief to clear out some of the back logs. With the drop in the value of Kina on the currency market the total unmet demand in Kina value may have already risen.

So the reality is that the back logs of demands are piling up. The more this goes on businesses will be forced to lay off workers or close down operation in the country.

Government 2016 budget;

The government should urgently introduce a revised budget or as in the words of Sir Mek a “mini budget” as the 2016 budget is no longer feasible given that its budget assumptions are no longer relevant. We are already in the middle half of the year. If it still endeavours to persist with this budget the government will be forced to seek additional loans both domestically and internationally to support its budget. This will further increase our debt level. Right now our rising debt level means that it is unwise and not prudent to seek additional financing to support the budget.

Domestic Economy

Apart from a possible rise in the prices of goods and services local industries that depend on the importers for supplies/materials will struggle to operate their businesses. These include the construction and manufacturing industries. The informal economy which is often neglected by the government is poised to once again soak up the bulk of the spill-over from a faltering economy. For the sake of diversifying our economy the government is once again urged to support the informal economy as a key strategy to supporting the growth of the SME Sector. Any attempt to suppress the informal economy in these challenging times could back fire against the government.  

2017 General Election

The call to introduce a revised or mini budget will require humility from the government. Since taking over, the government under the leadership of Peter O’Neill has pursued an expansionary budget. An expansionary budget gives the government leverage over its opponents as it quickly becomes popular with the constituency. Introduction of the Tuition Fee Free Policy, Free primary health, massive infrastructure developments and hosting of regional and international events are the outcomes of this policy. Right now Peter O’Neill is still very popular among the general population because of these ‘populist’ policies. As such to move away from it can be “politically damaging” for the Prime Minister and his government. From this context introducing a new budget would be an admission by the government that their initial budget has fumbled in light of the sudden drop in the global commodity prices. Infact it is looking ominous as each day passes by that this is likely to be the case. The writing on the wall points to a real need for the government to quickly reign in on its expenditure and instill control and discipline. Given that we are a year away from the general election it will be a test of character for the government to maintain this stance. Experiences in the past demonstrates that the period leading up the general election is one where the government goes on a massive spending spree to prop up its support among the voting populous. However, this time around the government will need to move away from this trend given the critical state of our economy. The frightening thing is that we are not too sure what the true extent of the mess that we are in at the moment. I suspect only the PM and his close aides know but they prefer to keep things tightly wrapped to prevent any revolt.  Yet they must also exercise caution and restraint. This is not the time to bank a nation’s future against an assumption that last time we checked was way off and brought us to where we are right now. For the rest of Papua New Guinea the health of our economy is anyone’s guess.  

PNG’s Land reform should embrace informal economy

By Busa Jeremiah Wenogo

The rapid rural to urban migration into major cities and urban centres in PNG has seen an increase in informal economic activities as employment opportunities become scarce. This is evident in the outpouring of informal peddlers and mobile traders onto the streets and road side due to inadequate space in the formal markets. In the property market informal settlements are on an exponential rise and the average number of people in a household has dramatically increased.   

The inadequacy of the government to readily covert undeveloped land into useable land for housing purposes has created a housing crisis in Port Moresby. Likewise discarding the informal economy from urban development planning has created discord between the government and the informal economy participants that has given rise to incivility and conflict in most centres. Customary and undeveloped State Land are being occupied by desperate city dwellers at an unbelievable pace leaving in its wake the urban development planners who have to play a game of “catch up”. Customary landowners long being victim of unscrupulous land dealings involving the State are not easily swayed by the State’s plea to release land for formal development. The Taurama Urban Development Pilot project in Port Moresby which was supposed to have been the blueprint for land reform in PNG is now in tatters. Land that were surveyed and gazetted for formal development in this part of Port Moresby have now been sold out to individuals through private dealings involving local landowners and corrupt government officials.  

Rampant corruption at the highest level will ensure that rental rates and vacancies are kept tight to maintain a high rate of return for landlords and property owners. While the government is to be commended for introducing an affordable housing scheme it is important that houses that are constructed under this scheme are built to meet the highest quality and standards. This is important in light of the loan repayment being spread over a maximum period of 40 years.  Apart from this the State does not have an up to date National Housing Policy to look at providing housing to its citizens nor does it have the capacity to regulate the rental and housing market. Such policy would signal real commitment to ensuring that access to affordable housing is a priority of the government. National Housing Corporation who is supposed to be the agency responsible for putting together such a policy is still struggling to get its house in order. In the absence of such key instrument there is no guarantee that future governments will continue with the current initiatives introduced by this government.

In addition to the above the government does not have a policy to deal with the Informal squatter settlement that are popping up uncontrollably at all corners of the cities and urban centers throughout the country. Similar to the failed notion that the formal sector would outgrow and subsequently subsumed the informal economy (informal sector); the idea that informal squatter settlement would be eventually overtaken by formal development has proven to be a failure in PNG and most developing countries. Instead successive PNG Governments weary of not committing “political suicide” have been finding the going tough in trying to rectify the settlement issue without jeopardizing their political base. The NCDC/UNHABITAT resettlement strategy to address settlement issues in Port Moresby could be a testament to this reality. However, NCDC alone cannot address the issue; it needs Department of Lands and the National Housing Corporation plus utility providers like EDA RANU and PNG POWER to come on board.

It is hoped that government inaction over the years to address these critical development issues are not a result of “conflict of interest” at the political level. Certainly most PNG politicians as documented in the media do have interests in properties both here and abroad. The current exorbitant rental rates provides an opportunity to garner attractive profits that any attempt to break this “monopoly” will not be easy.  

The current Physical Planning and Buildings law with its rigid standards are too high for most struggling Papua New Guineans to cope up with. This is one of the main reasons why the Informal Sector Development & Control Act 2004 in its wisdom deliberately excluded its applicability. The fear was that imposing these high standards would be detrimental to the growth of the informal economy. Furthermore, municipal authorities such as NCDC armed with zoning rights/powers have not factored informal economy into its planning. This is where introducing a new zoning category for informal economy is important to ensure that informal economic activities are not unnecessarily penalized by development. Its absence at present is forcing municipal authorities like NCDC to take a band-aid approach to addressing its issues. It is also important that the government consider cities with all its infrastructure as “national asset” to protect it from unnecessary abuse and damage from the public and local landowners. There are cities in the country that have fallen victim to vandalism from the public and the local landowners which have caused the government so much money to re-developed. Cities are meant to be a breeding ground for people of all walks of life; a melting pot where its social and economic lifeline is the diversity of people that make up its citizenship. Thus there is a great need for us to define the term “city” in our contexts so that we work towards a uniform approach to promoting development in our country. A clear understanding of what we mean by city will enable the government to better utilise its limited resources to build appropriate infrastructure.           

A sacrifice worth the nation’s admiration

By Busa Jeremiah Wenogo

It saddens me to hear the news that the UPNG Council has made a decision to suspend semester one (1) of the academic year for an indefinite period; basically affecting the education of some 4000 plus students. This decision was reached after the student body made its stance to continue the boycotting of classes until the PM steps down. This week will be their 4^th week of protest against the incumbent government over various issues of national importance. Call it what you may about their actions but the students took on the fight on behalf of the silent and reluctant majority to demand the government to respect the law of the land.  This is not asking too much it is just speaking the truth to the PM and the lot that as public office bearers who have taken an oath to serve the people of this country; they are obligated under the law to show utmost dedication to the rule of law. Is standing up for the truth worth the sacrifices that they are about to make?

Now that these future leaders of our country are faced with an uncertain future I realized that we have all failed in our own little way to stop this nation from reaching this point. I feel just as guilty and responsible for allowing the students to make a stand in my stead. This is not about an individual or a group of students this is about our nation and its future. This is something that we should all be passionate about and not taking it easy. Imagine how the parents or guardians of these students at UPNG are feeling right now. If there were to be a national course that unifies this nation against a common obstacle this could be it. The UPNG Council and the National Government should not take their decision lightly. Their actions will have repercussion on the nation’s future and they have to be prepared to live with it. The council’s decision is unprecedented. First they called in the police and now they have virtually thrown the students’ future out of the window. Is this a sign that our democracy is dying? 

Unfazed by the odds stacked up against them the students have now vowed to take on this fight to the length and breathe of this nation. Surely there are politicians who are by now convinced that this battle is not going to come to an end anytime soon. As elected leaders they are now required to make a statement whether in support or against the UPNG Council’s decision. No issue requires their urgent attention than this. Their deafening silence does not make them look good.

The bold statement by the PNG National Doctors’ Association and its sister unions to take on the fight of the students could signal the opening of a new front in this battle.  The medical fraternity has been one of the victims of the government “reckless” management of the economy that has seen their budget slashed significantly.  Now there are talks that the government is looking at adjusting salaries for top public servants. The battle between the Fraud Squad and the government has clearly revealed that there are police officers who are honest and dedicated to bringing justice. The recent defection of Hon Richard Mendani, member for Kerema to the opposition camp over what he term as “loss of confidence in the PM” demonstrates that there are MPs who are just as fed up with the way the government has manage the economy and the affairs of the nation. On social media and on the street the public disgust at the government’s conduct is evident. In this backdrop the students’ led nationwide awareness could unleash a “domino effect” that may eventually lead to the triumph of our rule of law over dishonesty.

The students’ sacrifices deserve the nation’s admiration.  Their resolve to conduct a peaceful protest is to be commended. They have thrust their young shoulders against a heavy cross. Now that they have reached the zenith of their journey the nation needs to step up and carry on the cross. Make 2017 general election count. Write a new destiny for this nation and prove to our students that their sacrifice is not for naught. Let’s hope that the Electoral Commission’s reluctance to conduct a referendum in both UPNG and UNITECH is not a sign of things to come when we proceed to the General Election. 2017 general elections compared to all other elections is posed to determine our nation’s future. It is “now or never”; PNG you decide.  

When the nation is in peril we must act with our conscience

By Busa Jeremiah Wenogo 

When the nation is in peril conscience must speak up. During such a turbulent time men of reasons must put aside their wits and draw courage from their conscience. It is the only means by which we can pass through this storm. For those in authority it is also a time for reflection, a time for soul searching to take a stand for what is morally and ethically right. This is the time when ordinary men become extraordinary figures in history. It all starts with calling evil by its name and driving it out of our existence using our will power.    

If there are members of the public who are not yet convinced by the damage done to the country I am afraid it could be too late for them to wake up to realize it. What has been circulating on the media (especially social media) if true should send shivers down our spines because by the time we do; we could be a country on life support or have gone to hell and is on the way back. The government if seriously concern about the welfare of this country should come out and open up about the problems that we are in. By keeping everything under the rug and trying to portray a positive image will only create doubts and confusion in the minds of the people. The anxiety and uncertainty that cloud much of last week was a welcome thing mainly because it arouse this awareness in the public’s mind about what is at stake. Too often we have taken such issues for granted even if they concern our nation’s well-being. It is time we create a society that is fully conscious about the impacts of the decision made by our political leaders on their lives. An ignorant populous has been the scapegoat for furthering political interest of certain individuals, groups and entities at the expense of the nation’s prosperity. This has to stop for the sake of our democracy and the rule of law.  

The UPNG led protest and the civil disobedience campaign orchestrated by the civil society begs a very important question in how we should fight corruption in this country. Should we just talk about it or maybe crawl or walk for some distance and hope that things will turn out the way we hope for or should we take the bull by the horn and bring its rampage to a complete stop. Though these activities have yet to bring to pass its desired outcome it is quickly instilling a sense of accountability in the minds of the public office bearers that PNG is not going to go down the road of “bankruptcy” or “destruction” without a fight. Its continuation is sure to generate a much wider response from the general population throughout the country. All this bode well for a very important 2017 General Election. History has shown that the public do respond emphatically to bring down a “bad” government for its actions. The demise of the PDM Party is an example. The PM knows that he is walking on a tight rope. Putting the court’s verdict aside his hold on the power will be fully tested in the general elections. I suspect there are MPs who have already decided that 2017 election would be the D-Day. As awareness campaign on the current crisis hits the ground they will face a very hostile environment. From this perspective what they do during this critical time leading up to the general election will determine their election prospects as well.

 

Certainly the revelation of key information over the last few weeks concerning the current state of affairs in our nation is beginning to paint a very depressing picture of the country both economically and politically. As the protest against the PM progresses chances are that the PM will have to re-evaluate his stance against the UPNG petition calling him to step down and face the law. The more defensive he becomes the more likely fuel will be added to the fire. What we could be witnessing is a “public persecution” campaign against the PM by the public as is the case with UPNG, UNITECH AND UOG students now crisscrossing the country to make awareness about the issues they are standing up for. Good luck with the court holding every protesting Papua New Guineans for contempt charges.

Like every Papua New Guineans I wish to remain adamant and not pessimistic about the future of our country. If there is one thing I learn from history is that our country and its people are very resilient. Our people have suffered often mercilessly at the hands of our own government’s ignorance of their plight. Yet they get on with their lives knowing that as long as they have their land or something to “put food on the table” the future looks promising for their children. You only have to venture into one of the settlements in Port Moresby or Lae for that matter to see what I am referring to. Out in the districts the challenges are even more insurmountable. Yet as the political snowball takes on new twists and turns I am wondering how long can our people resort to their resilience to overcome this monumental challenge that is before us all. I sense that somewhere down the line as the nation heads towards a perilous future the people of this country must act with their God-given conscience to save it from destruction. 

Reserve business sensibly

By Busa Jeremiah Wenogo

Upon the launch of the new SME Policy and its Masterplan the Minister for Trade, Commerce & Industry quickly announced that the government would look into introducing legislation to reserve certain business activities for Papua New Guineans. This proposition is said to be very popular among many Papua New Guineans. Certainly by observation there are evidence to suggest that most simple businesses which can be run by Papua New Guineans like tucker/trade store are being operated by foreigners. Regardless, such popular moves should be strictly done from a business sense and not for political convenience. Localization and nationalization if done properly could unleash enormous growth for local enterprises. However, if done purely for political reasons could turn disastrous and defeat the intention of the SME Policy.

The idea that businesses which require less capital should be reserved for Papua New Guineans makes a lot of economic sense especially when majority of our population are unskilled and semi-skilled. But at the same time you don’t want to unnecessarily stifle competition that is crucial to further its growth. More needs to be done by the government to unlock “capital” in our economy. Informal economy where much of the “capital” is locked-in needs to be nurtured by the government not neglected. This is where the setting up of incubation centres is a wise policy approach than the imposition of a blanket reserve on all businesses in PNG. Businesses need to be protected but they also need competition to be efficient and competitive both locally and globally. This is where broadly speaking the idea to protect certain businesses while “freeing” up others for partnership ventures with foreign investors and open competition is a sensible approach.   

A quick glance through the SME Policy especially on the categorization of the different levels of SMEs is sure to arouse fear in the minds of many foreign businessmen and women operating businesses in PNG. This is so especially when the Minister has said that within a period of 3 years all businesses that fall under the Business Reserve Lists will have their ownership transferred to Papua New Guineans. While industries across the board will be affected by the proposed “mandatory transition” the agriculture sector which plays a vital role in sustaining the needs of many Papua New Guineans will struggle the most. Already the controversy surrounding the Special Business Agriculture Lease (SABL) has prompted the government to explore other strategies to revive the sector. The injection of much needed capital, technical skills and technology in the sector primarily by the private sector has led to increase in quality and yield and at the same time revenue to the landowners in the form of employment, loyalties and dividends, infrastructure development and other services. In light of this the government should give credit where it is due. Competition is not bad it is important for efficiency. Private sector injection of capital and management skills is essential in reforming the agriculture sector to make it more viable so that it can sustain the needs of the nation’s populous as well as contribute revenue to the government coffers. The government in its part has failed miserably in prioritizing agriculture sector; the result is visible with huge chunk of land allocated for agriculture based activities throughout the country left undeveloped and estates and plantations now just a replica of its former self. From this perspective what is the guarantee that handing it over on a golden platter to locals will maintain its viability? The cost involved could quite frankly be enormous. Afterall most of our agriculture produce is destined for the international markets and our local knowledge needs to be elevated to a level where we can compete globally. Yet developments like the hydroponic project in 9 Mile which is a direct threat to the local organic fresh produce makes you wonder if the government is really serious about growing indigenous business in PNG.  

It remains to be seen if Papua New Guineans can be effective in taking over these roles from foreigners in the event the government implements its reserve list. There is no doubt Papua New Guineans are capable but our track record thus far portrays a different outlook. Cooperatives Societies throughout the country are in total disarray and extension services that are meant to be provided by the Department of Primary Industry are no longer visible in most districts of the country. There are important issues that the government will need to address as a pre-requisite to introducing legislation to protect various business activities for Papua New Guineans. From the outset the government will have to help Papua New Guineans to manage “wantok system” so that it does not hinder the growth of indigenous business. The failure of the Stret Pasin Stoa Scheme and other intervention to support indigenous business in the past is a testament of our own failures. This could explain the reason why more Papua New Guinean business owners nowadays prefer to lease out their business to foreigners. In saying that PNG’s social setting is not suited for business/commercial activities. It does not support entrepreneurship in an “individualistic” sense as is the case in most capitalist economies. PNG is largely a communal society where each individual conducts his/her business for the benefit of the larger entity whether that would be the family, tribe or community. This reality means that the government’s urgent task is to continue reforms in the area of land management. Reforms in the ILG Act and Lands Act needs to support this not undermine it by promoting an economic model that will not work for PNG. The government’s role in all of this should be one of being a facilitator. The government should facilitate trade and investment and allow private enterprise (or in the case of PNG; collective enterprise) to operate with minimal interference from the government so that it can utlilise and distribute resources in an efficient manner.    

Faced with this harsh reality what is the guarantee that implementing the reserve lists will be beneficial to all Papua New Guineans and not for the interest of few “powerful” citizens? Furthermore the vacuum left behind by the government inaction in the agriculture sector has forced the private sector to inject money into extension training and create market for the local rural population. In this case reserving businesses for Papua New Guineans may disadvantage the agriculture sector and the majority of Papua New Guinean agriculturalists.

Reserving business activities does not mean that it will lead to a fair and equitable participation by all Papua New Guineans in the management and ownership of businesses. Given that most Papua New Guineans are still in the informal economy (the elementary stage of the business cycle) there is a highly likely possibility that business ownership and management will be in the hands of few individuals leading to the development of “politically” backed conglomerate or monopolies in the market. The government should also consider the fact that not all Papua New Guineans would want to venture into the SME Sector. This means the government should be willing to support the informal economy so long as it is able to meet certain “minimum requirements or standards”. Unattractive taxation regime, cumbersome paperwork and long processes to acquire legal status for operating businesses formally are some of the “put offs” that eventually push businesses into the informal economy. If these are left unaddressed then reserving business space for Papua New Guineans may be counter-productive and meaningless.

The development of “political monopoly” where politicians give away business to their cronies and supporters has been counter-productive to our nation’s development. The process of transferring ownership should be done in a fair and transparent manner using strict rules and guidelines. The absence of such a credible mechanism will only entrench the “free handouts” mentality that is already pervasive in our country. This will lead to a significant drop in quality when industry best practice are not applied in the recruitment of skilled workforce and production as decisions concerning the management of these businesses are made for political convenience or to gain political favours. This will run counter to the goal of increasing the number of SMEs and employment numbers in PNG, the ultimate goal of the SME Policy. The demise of the Papua New Guinea Banking Corporation (PNGBC) and the NASFUND saga are vivid examples of the scale of destructions that can be realized when politics gets in the way of business.  This is where the government if serious about providing Papua New Guineans of all walks of life a fair go should publicly list all these companies on the stock market and invite Papua New Guineans to take up shares in these companies rather than a complete nationalization/localisation of these companies. Companies who are operating in challenging environment like those in the agriculture sector are starved of capital and raising that on the stock market would be a good option. Government being the custodian of the people has not lived up to its expectation when representing the people of this country on company boards. Given that basic services such as schools, aid posts and roads are in a diabolical state in most districts one wonders where the dividends and the profits declared by the government owned businesses have gone to.

Reserving businesses at a time when the government is aiming to introduce the nation’s first “Trade Policy” creates a tricky situation. Moves to forcefully take over businesses from foreigners may provoke retaliation from international trading partners. This requires the government to craft a trading policy that does not jeopardize its existing and future trade agreements.

Perhaps the writing on the wall indicates that the time is not yet right for PNG to embrace the “reserve list”. It may also testify to the fact that as a nation we need to fully develop our informal economy if we are serious about building a large national grid of indigenous businesses to power up our economy into the next century and beyond.  Right now the promotion of the reserve list is set to be “concave” and not inclusive. It’s good to be ambitious but it is also wise to be practical and realistic. In a sense this very much summed up how the government should be addressing the reserve list agenda where sensible reasoning is required above else.