PNG hits economic bumps as Chinese economy corrects

BUSA JEREMIAH WENOGO

RECENT news about the devaluation of Chinese the yuan against the United States dollar should seriously concern the Papua New Guinea government given that China is one of our largest trading partners.

Since the Chinese economy began to cool off, the People’s Bank of China has devalued the Chinese currency in a bid to make Chinese exports cheaper.

The yuan is expected to continue depreciating unless Chinese authorities are satisfied the sliding economy has bottomed out.

The implication for PNG is that the kina will have to be devalued against the yuan to keep our exports competitive in Chinese markets.

The Chinese economy, which was projected to grow at 10% this year, is now forecast to top out at 7%. This means commodity prices will continue to tumble as Chinese demand takes a breather.

For PNG this means a further fall in commodity prices and a revision of our economic growth rate, currently projected to be around 10% mark but likely to be around 7%.

Despite forecast budget problems, the PNG government last week reassured the country that the economy is sound – but there are increasing signs of budgetary stress. For example, yesterday PNG Attitude reported that universities are having their government funding cut by a massive 40%.

This flew in the face of a government commitment to maintain funding to key priority areas such as health and education.

The government has also argued that its debt level is under the “lawful” ceiling of 35% of GDP. However, in the event that public debt eclipses the ceiling captured in the Fiscal Responsibility Act, the government could argue this has come about due to expansion in GDP. Lies, damn lies and statistics.

The main concern is that the government, by default, may underestimate or deliberately neglect the GDP level in pursuit of an expansionary budget and give rise to much higher public debt.

Right now, the government estimates that the debt level at 34.2% of the GDP, however there are suspicions that the actual figure is worse than this.

So far the government has not looked at raising revenue through tax, instead it has opted to undertake cost cutting measures by taking funding from what it terms as “non-priority” areas in its budget to support its key policies on health and education.

Or so the government says. As I described above, behind the scenes it seems that even these ‘protected’ sectors are being hit hard.

It is worth noting that most of the borrowed funds were used to finance projects predominantly in Port Moresby and Lae. The impact of borrowing on the wider economy will only be felt once loans are used to rehabilitate the highlands highway or similar projects that will allow rural people access to markets.

Concentrating most of the spending in urban areas, biases PNG’s economic growth and helps explain the continuing drift as rural people flock to urban areas to take advantage of what they see is a buoyant economy.

For the sake of rural folks, the last thing we need is for the government not to honour its commitment to the range of decentralised improvement programs as it come under increasing pressure to keep the economy afloat.

PNG’s economic situation could become desperate if commodity prices don’t pick up quickly given that the government needs to meet its debt obligations. Thus far PNG has an impeccable record as it has never defaulted on a debt repayment.

Yet this could change if the government’s revenue sources dry up. According to the government there is no need for panic given that about 60% of its total debt is domestically financed due to high liquidity in the banking sector.

It also argues that the 30% of its foreign loans are low interest. That said, it will be interesting to see if the Exxim Bank loan and other loans sourced from China will have their interest rates adjusted as the Chinese economy continues to slide.

The PNG government is also adamant that its import cover of nine months means that foreign reserves are adequate to sustain imports until such a time when both the Chinese and PNG economies rebound.

I’ve argued in the PNG Attitude blogsite on a couple of occasions that the Chinese system of government will be forced to change as its citizens demand the same level of freedom and privileges enjoyed by the citizens of the democratic countries.

The phenomenal growth of the Chinese economy over the last 30 years has acted as a pressure valve as improvements in material well-being have minimised dissent that could lead to civil unrest.

What is happening in China’s economy now is a challenge to the Communist regime as it nuances its way to economic and political reform.

I guess here in PNG we’ll just have to strap ourselves in for a bumpy ride. As it is now, most of the world’s economies including ours are being dragged into a fast developing hole and the end is not yet in sight.

Pride more than anything else is killing PNG's Economy

By Busa Jeremiah Wenogo

While commentators and Economists alike in recent times have been ringing the warning bells over the reports of the Mid Year Fiscal Economic Fiscal Outlook being recently released, very little has been said in describing the government's spending behaviour. The government in its part has also tried its best to save face by trying to settle the nerves of the public. Its Finance Minister has been adamant ever since the red lights came on. The Opposition has been on the attack ever since the government undertook a decision to take out a massive loan with the EXXIM Bank of China and then the infamous UBS Loan. The fact that the government will introduce a supplementary budget this year indicates that the economy is well and truly "under stress" and some "belt tightening will have to take place". Within the government circles Departments and agencies have been asked to slash back funding from their "development budget" as a "savings measure".

The problem with PNG's Economy right now is that it is in danger of "sinking" because of "pride".

The increase in expenditure (which I suspect has already push the "GDP-debt ratio" beyond the required ceiling in the Fiscal Responsibility Act contrary to media reports and statements from Treasury) has now surpassed historical spending figures since independence.

This has all come about because we have decided to play "big men" politics nationally, regionally and globally.

A downturn in commodity prices and other factors are now being blamed for this huge gap between expenditure (actual) and revenue (projected) however, we must never forget the fact that we have spent well beyond what we could have.

Is it mismanagement of the economy? Yes I think so because any right thinking government knows that we are mortgaging our assets (SOEs and other assets) as collateral for the loans against future earnings that are bound to fluctuate.

While the argument will be that PNG unlike in the past has the capacity to spend to that level because of large projects like LNG and other extractive projects, the government must be mindful that much of these large investments are primarily driven by loans.

Somewhere down the line the government (today and future) will have to pay for it regardless whether we are earning income from our exports or not.

The current situation of our economy has a very real possibility of pushing our government to ramp up its effort to get the 2nd and possible 3rd LNG into production mode as soon as possible. It will also mean more exploration and development licenses will be issued for potential investors to make "its books" look good.

The danger in all of this is that it will lead to unsustainable outcomes where no proper "social mapping" and "environmental impact assessment" will be done.

Because of our reckless management of the economy to satisfy our "pride" we will be putting the lives of our people now and the future generation at risks.

In economics it is known that whenever a government plans to undertake a "fiscal expansionary budget"/deficit budget it will be very difficult to reign in the expenditures when the popularity of the government sours as a result of increase economic activities and general improvement in the well-being of the population in terms of employment and income generation.

The current government has basically done that in its commitment to host regional and global events while churning out large chunk of money to Port Moresby at the expense of the rest of PNG.

In order to get our economy back on track the government will have to "humble" itself. Furthermore, it needs to grasp the reality facing most of our Papua New Guineans rather than working on a "default" mode assuming that all be OK.

No it will not so long as we "beat our chest" in "pride". Too much of our "pride" has already brought our economy to its knees. What is happening to Ok Tedi could be an indication that we have done so much harm than good to our own economy and people that it is now time to change our approach.

Inorder to get our economy back on the track the government will have to "humble" itself. Furthermore, it needs to grasps the reality facing most of our Papua New Guineans rather than working on a "default" mode assuming that all be ok. No it will not so long as we "beat our chest" in "pride". Too much of our "pride" has already brought our economy to its knees. What is happening to OK TEDI could be an indication that we have done so much harm than good to our own economy and people that it is now time to change our approach.

Winds of change: Are they blowing PNG good or bad?

BUSA JEREMIAH WENOGO

WHEN the Communist Bloc started to crumble in the latter part of the 1980s, these climactic events were said to have been triggered by a “wind of change” blowing across the USSR and Eastern Europe at that time.

In the same sense Papua New Guinea’s development and economic progress in the last decade or so can be said to be the result of a similar phenomenon of rapid transformation.

Favourable international economic conditions have enabled Port Moresby to transform into a thriving city, a  symbol of what prime minister Peter O’Neill recently said was an endeavor to transform PNG into the “most powerful nation in the Pacific”.

National Capital District Governor Powes Parkop has described these enormous developments as the result of the “wind of change” blowing through PNG.

While such statements may provide a glimpse of the future of the national capital and PNG at large, unfortunately they are far removed from the reality on the ground.

The wind of change may well be blowing but for most folks in remote villages and urban settlements they mean little. Most people view the government with suspicion and distrust.

Whilst things may look positive on the outside, on the inside many people are confused and anxious about the future. For too long they have been tricked into believing in policies that brought no tangible change to their lives.

Perhaps we can hope that these recent developments are signs of better things to come. Perhaps.

Like every law abiding and patriotic citizen, I hope that the massive infrastructure development in Port Moresby will instill a sense of responsibility and pride in the minds of our people.

In saying that, I am mindful that for most people the daily struggle poses a major barrier to change. The sight of mothers and youths selling their meagre possessions under the sparkling new flyover bridge is a daily occurrence.

Not far away from PNG’s first flyover is a small messy area recently taken over as a market. It is buzzing with betel nut vendors. This filthy place has already drawn the attention of city authorities and, as the Pacific Games kicked off, the sound of teargas canisters thundering into the locale could be heard for miles around.

It was a reminder that, for most of our people, change is not so personally transformational.

While the government has injected massive amount of money into building world class sporting facilities for the Pacific Games, the main source of energy, electricity, is still a big problem for most settlements and villages in PNG.

This important marker of modernisation is not accessible by most Papua New Guineans. Access to it is so difficult and costly where I live that most settlers resort to illegal connections.

Power poles built to cater for one or two lines can be seen bending low as they support multitudes of wires that crisscross each other in tangled disorder. As you would expect, this has significantly affected the flow of electricity. Battery powered torches and candles are common.

Access to clean water in most Port Moresby settlements is a major concern. I have previously documented Erima’s experience where the government has resorted to setting up “common taps” at strategic points to allow settlers access to water.

It is hardly a viable means of addressing water issues. Over the years lack of community ownership and leadership have allowed these facilities to be at the mercy of vandalism, which is a constant problem.

Roads in other parts of PNG need the same attention those in Port Moresby have been given recently. Many of our roads are often impassable for vehicles yet we see the government spending money on city roads costing taxpayers billions of kina.

This is most unfair given that much of PNG suffers from poor road conditions and broken bridges which are crucial for providing market access and bringing in basic services such as education and health.

Papua New Guineans often complain that they are spectators in their own country. I wonder if the government is the great pretender giving the outside world a flowery outlook of our country’s socio-economic prospects when the reality is the opposite.

Transforming Port Moresby into a modern city is commendable, however its development has come at a high price for other provinces. It has also resulted in an influx of migrants from rural areas. We are experiencing rapid rural-urban migration such as we never saw before.

As Port Moresby’s population heads towards one million, I wonder how the city authorities will be able to provide the necessary amenities and municipal services.

Already settlements at Erima Arts Centre, Paga Hill, 2 Mile and parts of 8 and 9 Mile have been removed to make way for road construction. Such relocation seems likely to continue as Port Moresby caters for an inflow of investors. The government will have to make more trade-offs between protecting its citizens’ rights and entertaining foreign interests.

Sure, we are witnessing something transformational and it may well mean that a favourable wind of change will blow across Port Moresby to the other provinces.

But, if we are not careful, it may develop into an ill wind - a cyclone that will displace very many people and severely affect their livelihoods. It seems the writing is on the wall. Let’s hope someone reads it and acts before the majority of our people lose what little they have now.

Is PNG’s great leap forward one in which all can share?

BUSA JEREMIAH WENOGO

I’VE recently noticed the hype of activity in and around Port Moresby as the city gears up to play host to the 15th Pacific Games.

Soldiers and police are present on every corner of the city in preparation for the Games. Beside Port Moresby’s freeways and along its streets are billboards and placards promoting the Games.

The media keeps us in the loop by counting down the days to the opening ceremony elected leaders are constantly urging and reminding us to embrace the Games and change our attitude for the better.

Surrounding all this is a feeling that change is imminent in the city but it is not clear whether it is for the good or worse of the majority of the people. When one moves around the city, you can see clearly the divide between rich and poor.

As the city expands, the wealthy are pushing the poor to the fringes and high class residential areas like Touguba constantly see new buildings which fuel the already exorbitant and property values (and rental rates) of Port Moresby.

The price of goods is so high that even formal sector employees find it difficult to keep ahead of inflation. If this continues I am afraid we could end up with slums like the Soweto ghetto of South Africa.

Places like 6, 8 and 9 Mile once included vast undeveloped tracts of land where the Department of Primary Industries administered much agriculture and livestock activity.

Today these areas teem with businesses and people. Subsequently the government has been forced to build the necessary infrastructure to catch up with the development. Every day is Catch 22 for the government as it tries to get control of the situation.

It is amazing how, in the last two decades, Port Moresby has transformed from a backward crime ridden place to a global city. But there is a lot of work to be done before we are on par.

In addition to the Pacific Games, Port Moresby will also host the 2018 APEC Summit and the FIFA Under 20 World Cup. Recently the government also expressed its desire to host the Asia Caribbean Pacific Leaders’ Summit in Port Moresby.

While such events seem to augur a transformational approach in PNG, in particular Port Moresby, PNG’s development since independence has brought layer upon layer of problems that have been left unresolved because we have had to adapt to great change within a short span of time.

That is why socio-economic problems such as rural-urban migration, unemployment and population growth are putting PNG’s future on the brink of uncertainty. We have not reflected effectively on our challenges and as a result have gone around in circles when it comes to planning and development.

We have so many policies and laws in this country yet we fail time and again to implement and bring to fruition the objectives we establish. And every time we fail our people, we create a more unstable nation because people become irritated and feel disenfranchised and put out by the government.

PNG has a long history dating back 50,000 years while modernisation started let’s say in the 1960s as we moved to become an independent state. When traditional and modern collide there are bound to be problems.

Simply put: With modernisation we have been asked to abandon 50,000 years of existence for a lifestyle barely over 50 years ago. We should commend ourselves for adapting to great changes in record time yet have we truly grasped the direction in which it leads us?

Most importantly, have we agreed whose interest change should serve?

If you look at PNG’s socio-economic indicators, you will see that we have a very high illiteracy rate and most of our villages remain isolated and lack access to basic services such as health and education.

International trade is supposed to have brought us benefits to improve our living standards, not added to our woes. Something is not right.

We were offered independence on a platter yet we have blindly taken our people into a world spinning out of control. We continue to unearth natural resources and there is a lot more wealth still untapped. But there is very little to show for it.

While much can be said about PNG’s progress with regard to democracy, there is little to be proud of when the bulk of our people are isolated from the significant improvement in standards of living worldwide.

We have not given our people an opportunity to have a say whether they want change and what sort of change they want. We have also not prepared them for change.

Furthermore, certain groups of people have been able to use their power to monopolise much of the nation’s wealth. Good government has been highjacked during elections and on the floor of parliament and our system of government has been labeled a kleptocracy.

Political power plays continue to allow inequality, wantokism and corruption to go unabated. If left unchecked this looks sure to fragment the political landscape of this country.

The latest infrastructure development in Port Moresby can be described in the same vein. Flyovers, freeways and stadiums are signs of progress, yet there are countless thousands of people who have become bystanders watching the world around them rapidly changing but unable to participate.

We seem to be pushing development on the notion of every man for himself.

Just as there is a socio-economic divide within Port Moresby, there is a clear disconnect between Port Moresby and the rest of PNG. The capital is a magnet attracting people from all corners of PNG and the world at large.

For someone like me who grew up in the early 1990s, the changes are hard to comprehend. Over the last 20 years I have seen Papua New Guinea move from a cassette to a CD and then a flash drive society. From snail mail to digital.

As I contemplate what the future holds for my country, I believe we would all agree on the reality that PNG’s progress has been nothing short of a great leap forward.

Yet, with so much accompanying corruption, we do wonder if it has been a great leap forward for all. I guess only time will tell. 

A tough nut to crack: legislating for PNG’s informal economy

BUSA JEREMIAH WENOGO & JOHN CONROY | DevPolicy Blog | Extract

IN Papua New Guinea it is government policy to encourage growth and development of the informal economy. This may surprise observers aware of how often the ‘informal sector’ is the subject of controversy.

After years of effort, a national informal economy policy was adopted by the National Executive Council in 2011, driven by the then Minister for Community Development, Dame Carol Kidu. She was supported in this by the Consultative Implementation and Monitoring Council.

Sadly, the policy lost momentum after Dame Carol departed the Ministry and retired from politics. Three changes of Minister and loss of continuity in the senior bureaucracy have contributed to stasis in the meantime.

As Dame Carol found, gaining support for the policy was an uphill task in the face of entrenched antipathy to the ‘informal sector’ among some members of the PNG political class.

At both local and national levels there are many examples of this antipathy, which reflects an elite psychology distanced from ordinary people who throng the streets and markets of the towns. It suggests an inferiority complex, a sense of shame that such people are a barrier to ‘modernisation’.

The epicentre of this disgust is the street trade in buai (betel nut, Areca catechu). While city authorities are entitled to feel that public consumption resulting from the trade is a blight on the appearance of towns and a risk to public health, it is also a model domestic industry, in terms of the numbers of people it supports, the income generated, and the efficiency of its logistical system.

We can soon expect to see vendors of buai and other commodities cleared from the streets of Port Moresby as part of a clean-up in preparation for the South Pacific Games. What we cannot expect any time soon is a sensible attempt to solve the dilemma — not of the buai trade itself, but of the public consumption of betel nut — while retaining the considerable economic benefits it yields to low-income people.

It is a mark of the immaturity and limited scope of the PNG informal economy that it still lacks a sufficiently diversified set of activities, so that a single informal industry has assumed such notoriety.

The national policy adopted by the National Executive Council suggests measures to encourage a more diverse set of ‘informal’ activities, but implementation of these has been slow due to budget constraints.

In PNG the informal economy is too small, not too large and is still too limited in scope, scale and contribution to national output. A better functioning and more diverse informal economy is seen as necessary to increase the efficiency of linkages between mineral enclaves and the broader population.

A new Minister for Community Development, Youth and Religion (Hon Delilah Gore) and a new Departmental Secretary (Anna Solomon) now give hope that the national policy can gain traction and impress itself on a broader range of government agencies.

Certainly the Department seems now to have a renewed sense of ownership and commitment to the policy.

You can read the complete article here

Busa Jeremiah Wenogo is an economist working with the Consultative Implementation and Monitoring Council in Port Moresby. John Conroy is a Visiting Research Fellow at the Crawford School, ANU

PNG's settlements - beer, loud music, drugs & gambling

BUSA JEREMIAH WENOGO

A short distance away from our house a bass speaker can be heard pumping music at force into the airwaves.

The screams of drunken ecstasy and sound of beer bottles smashing on the road send shivers along our spine as we sense that trouble is just around the corner.

Since we moved into Erima settlement, we have witnessed several alcohol related fights mostly instigated by youths who decided to get a cheap high by drinking coffee punch and smoking weed.

Normally when these fights break out, the sound can be heard miles away: iron roofs and fences rattling with pelted stones and the splinter of beer bottles smashing at random.

So on Friday our family knows that the coming weekend will be agonisingly long for us as we have to weather the nuisance that starts early in the morning, peaks in the evening and continues until Sunday.

Friday reluctantly welcomes the weekend most of which will be occupied by drunkards roaming the streets causing trouble.

At other times drunken men and women can be heard chanting in unison and dancing to the tune of traditional songs. The first night we moved into Erima we found it difficult to sleep because of the deafening sound coming from our next door neighbour.

We were drowning in insanity as music, cranked up to an unbearable level, crowded out every scrap of peace and calmness. Fortunately, as time went by, we got used to it and now we largely ignore it altogether. We somehow became sound proof.

When our ears are not battered by alcohol-inspired noise our eyes are made sore by the sight of idle settlers clustered at a certain hideous location to conduct their gambling. Bingo and card playing are most common.

Old, young, youths, mothers and fathers engage in these activities. I often wish these gamblers, especially the kids, would develop similar concentration when in school. We would see many more students making it to higher levels of education. Yet it is true that, lacking the required resources to support their children, parents in settlements cannot help but watch as their kids’ bright future gets dimmer by the day.

In the community where I currently live, I noticed that people’s backward mindset is central to the lack of development. As a result, water was disconnected several years ago and the electrical current arrives but sluggishly.

The lack of such vital services has primarily been due to the community not showing real ownership. Settlers in my community generally don’t like the idea of spending money in order to access utilities, convinced that they should be provided freely by the state.

So they go through their days thinking and acting as if they are still back in the village. This also means a blatant disregard for the rule of law and unnecessarily penalises honest and hardworking ratepayers.

Recently a water committee was set up to take care of a common water tap. Users were required to pay a minimum fee of K15 per month to allow them to fetch water from the tap. It can be as high as K30 a month depending on the size of the family.

Given that I have a pretty large family that consists of my wife and son, two younger siblings, my parents, my sister, her husband and her son, I normally pay K15-20 per month.

We pay but most of the settlers don’t, assuming the committee is collecting the rent for its own personal use. Yet when they need water, they resort to the tap. The money goes on beer, music, drugs and gambling.

The paradox of most PNG settlement is that, although they have become safe havens for social disorder, politicians don’t have the courage to make hard decisions to deal with the problems.

It has been shown time and again that settlements play a major part in determining the outcome of general elections in urban constituencies. So even though they are a problem to development, getting rid of them is a political challenge.

In future this will become more evident as rapid rural-urban migration, the housing crisis and lack of state-owned land will increase the number of squatter settlements in Port Moresby. And they are very troubled places. Most of the unemployed labour force indulges in non-productive activities that add little benefit to the fabric of our country.

As the pace of development increases in cities like Port Moresby and Lae attracting more rural people to the bright lights, more beer will be consumed, the music will get louder, more youths will have their brains fried by marijuana and more kandis (card playing) will divert the idle.

This will accumulate to more social problems yet it is unlikely our politicians will be prepared to take a tougher stance on cleaning up these issues.

Instead, in an attempt to protect their electoral base, they will play things safe and nothing will change.

What we have then is a developmental paradox that will not need fancy policies and complicated laws but simple straight forward steps that a settler knows best.

PNG’s financial inclusion drive needs a Banking Ombudsman

BUSA JEREMIAH WENOGO

THE establishment of Papua New Guinea Banking Corporation (PNGBC) was one of the catalysts for the high level of financial inclusion in PNG in the past.

Yet political interference in the management of the bank’s affairs subsequently led to the government liquidating and selling it to Bank of South Pacific.

In those early days the PNGBC spread its wings to the far corners of PNG and ordinary Papua New Guineans opened simple passbook accounts to save their hard earned cash. School kids too.

Its closure cut off countless people from the formal banking sector and the road back into the banking sector for many Papua New Guineans under BSP has not been easy.

For those who decided to stay loyal to the bank through its transition into BSP, it has been a big challenge just to keep their accounts active.

While formal sector workers were able to maintain their accounts, those in the informal sector, mainly farmers, were not lucky.

Over time, the old bank’s policies were drastically changed to reflect the new management’s desire to develop the bank into a corporate entity capable of generating greater profit. The bank’s commercial interest took precedence over the government’s obligation to the community.

As a result uneconomical bank branches set up during PNGBC’s heyday were soon shut down. Stringent policies were introduced to ensure the bank did business only with those customers considered “bankable”.

These decisions cut off many people from accessing basic banking services. The World Bank found that almost 90% of the population was “unbanked” or “financially excluded”.

This represented a major development challenge for the government as most people were deprived from actively participating in economic development. Those excluded also included formal sector workers such as teachers, medical officers and plantation workers based in the rural areas.

Most of these professionals prefer to be paid in cash or by cheque than through bank accounts because of concern that bank fees and charges decimate savings.

The government asked how it could foster an environment to bank the unbanked population and through the ground-breaking National Informal Economy Policy 2011-2015 identified “microfinance” as an instrument to bridge that gap.

The success of the Nationwide Microbank Ltd and the PNG Microfinance Ltd showed the great potential of microfinance. Furthermore it unearthed the massive untapped demand in areas that were traditionally regarded as unbankable. Subsequently existing players like BSP embarked on extending their services into rural areas.

The microfinance industry has since expanded with WauMicrobank, Women’s Microbank and Pipol’s Microbank as part of a strategy to bank one million unbanked people by 2015. Furthermore, the introduction of mobile phone technology has allowed further penetration and with it massive uptake in the market. The rapid spread of mobile phones is further proof of the depth of the PNG market.

Mobile phone technology provides banks with a cost effective and seamless way of extending their services while providing people with the opportunity to access banking services at their fingertips.

The introduction of mobile phone as a service delivery platform will change the formal financial sector in PNG. This is due to the leadership shown by the Bank of Papua New Guinea in driving the agenda of financial inclusion from the outset.

Yet questions are being raised on the central bank’s ability to regulate and at the same time promote the expansion in the financial sector. Some fear the bank is compromising its traditional role as a policeman guarding against unfair play by financial institutions.

Others commend the bank for taking on this challenging role as promoter of a noble agenda. They view BPNG as the ideal driver given its wide ranging powers to introduce reforms and provide supervision to maintain the health of PNG’s formal financial sector.

Already the bank has included financial inclusion as one of its key policy priorities and has created a new unit to focus on driving it.

BPNG has been proactive and smart in ensuring it does not compromise its regulatory function through its Centre of Excellence in Financial Inclusion (CEFI). The establishment of CEFI can be seen as an attempt by the Bank to offload its promoter role.

While CEFI will coordinate financial inclusion activities, it remains to be seen how BPNG will address customer complaints. It needs to come down to a level where it can be reached by ordinary people.

In forums conducted by CIMC, participants have frequently expressed their desire to have BPNG establish branches in provinces to address customer grievances. This shows how widespread are the problems customers experience in banking.

The majority of customers in PNG are either illiterate or semi-literate. Most of these people are in the informal economy, largely composed of the agriculture sector. The government through its central bank has an obligation to protect the interest of ordinary Papua New Guineans who have accounts with these commercial banks.

In fact there are more complaints than compliments about the commercial banks’ unfair play. Complaints to banks for remedial action normally go through an internal investigation process. But whether the bank actually attends to the complaint or not is unknown.

When customers don’t receive feedback there is frustration. The establishment of a Banking Ombudsman will further strengthen the investigation of customer complaints. But, right now, customer confidence in the banking sector is lacking and this issue needs to be addressed quickly.

Regaining the trust and confidence of people is a pre-requisite to reducing the divide between the financially included and the financially excluded. Without instilling trust, the majority of Papua New Guineans will remain skeptical of the idea of financial inclusion creating an obstacle to the aim of increased access to financial services.

The time is ripe for the government to introduce a Banking Ombudsmen to ensure the interests of customers are protected. A Banking Ombudsman investigates and resolves disputes between customers and banking service providers. The entity is independent of its participants, customers, and government. Its services are freeand easy to use. One of the important elements is its ability to produce fair and independent findings concerning customer complaints.