Economic and security challenges facing PNG and the Pacific Islands

Volume I – Economic and security challenges facing Papua New Guinea and the island states of the southwest Pacific

© Commonwealth of Australia 2009
ISBN 978-1-74229-150-5

19 November 2009

Executive Summary
In this report, the committee considered the nature and extent of the key economic challenges facing Pacific island countries and Australia’s bilateral and regional endeavours to help these countries meet such challenges. The committee covers security matters in a separate companion volume.

The committee identified a range of impediments to economic growth in Pacific island countries. Some of these are inherent structural problems that are beyond the control of these countries—small populations and land mass, limited range of natural resources, remoteness and susceptibility to natural disasters. These physical and geographical limitations often produce conditions that inhibit the ability of Pacific island countries to develop their economies. They include little scope to achieve economies of scale, difficulties developing the human capacity necessary to support and sustain a growing economy, narrow economic base, reliance on a small range of export products and the need to import key strategic products, such as energy. These circumstances, however, are not fixed and can be moderated to minimise their adverse effects on economic development.

Thus, although difficult, it may be possible for Pacific island countries to diversify their production base, build much-needed human capacity, expand their export markets, minimise dependency on imports, and make the environment more resilient to the damaging effects of natural disasters. A number of submitters, however, pointed to the poor or lacklustre economic performance of Pacific island countries and suggested that they are not fulfilling their potential; that, despite their disadvantages, they could do more to help themselves toward increased growth and better development outcomes.

Australia is actively assisting Pacific island countries to meet their many economic challenges with its extensive aid program in the region. Work is being done in agriculture, fisheries, forestry, mining, natural disaster management, climate change, economic infrastructure, education, health, financial management, governance, law and order, land tenure and financial services. Across all these key areas, Australian funding is being used for research and development, building and improving infrastructure, and to provide advice, training, education and technical assistance.

Although the region has been receiving high levels of assistance for many decades from overseas donors, including Australia, many Pacific island countries still struggle to meet their economic and development challenges. In particular, capacity constraints, both in physical and human resources, continue to impede economic development in the region. In this context, the committee expressed a number of concerns about aid delivery to the Pacific which have direct relevance to Australia’s official development assistance (ODA) program. The committee found:

  • aid does not always reach the intended beneficiaries or those most in need of assistance;
  • Australia’s response to the effects of climate change in the region does not seem to match the islands’ urgent call for action—importantly environmental matters are not yet a mainstream concern guiding the formulation of Australia’s ODA policy;
  • more effective ways need to be found to help ease the burden on Pacific island countries of monitoring and policing activities in their EEZ, forests and around their border crossings;
  • although over 50 per cent of Australia’s bilateral ODA to the region goes to governance, one of the main weaknesses remains the inability of bureaucracies in Pacific island countries to deliver essential services on the ground—whether it relates to resource management, education or economic infrastructure;
  • the tendency for the benefits from aid programs to fade as projects come to an end and funds and technical assistance are withdrawn;
  • ODA could be aligned more closely with the needs and priorities of the recipient country—for example, evidence suggested that there was a serious disconnection between the courses offered by training institutions in the region and the requirements of local businesses and industries;
  • better use could be made of the private sector to help alleviate poverty in the region and boost economic activity—sustainable tourism in particular holds much promise;
  • aid work could be better coordinated with the activities of other donors, including within Australia (state and local governments and NGOs) and with donors from other countries;
  • Australia’s ODA policy framework could be strengthened by integrating the many and varied activities into a concerted whole-of-government effort—indeed, even within sectors, there appears to be a lack of policy coherence, such as in governance;
  • a need to ensure that there are strong links between Australia’s response to conflict and complex emergencies and the need for longer-term assistance in capacity building and disaster management;
  • statistics on key development indicators such as school attendance, literacy, numeracy, employment and workforce participation are sketchy, unreliable and out-of-date, which makes policy-making difficult for the governments of Pacific island countries and for aid donors; and
  • monitoring and evaluation of Australian aid programs, critical to achieving continuous improvement, could be more robust.
  • Finally, Australians working in the region have accumulated, and continue to add to, an impressive body of understanding and experience in the complex and difficult task of building capacity, especially in the transfer of skills. It is important that this knowledge is captured and used to benefit all those engaged in Australia’s ODA.

View the report as separate downloadable parts:

  Spacer Image
Members of the committee (PDF 47KB)
 
Acronyms and abbreviations (PDF 49KB)
 
Executive Summary (PDF 70KB)
 
Chapter 1 – Introduction and conduct of inquiry (PDF 74KB)
Referral of inquiry
Terms of reference
Conduct of inquiry
Scope of inquiry
Structure of the report
Acknowledgments
 
Part I – Overview of the economic performance of Pacific island countries
 
Chapter 2 – Economic performance (PDF 104KB)
Economic growth
Remittances
Overseas aid
Global economic turmoil
Human development
Conclusion
 
Chapter 3 – Structural impediments to economic growth (PDF 106KB)
Population
Land mass
Natural endowments
Proximity to major markets
Natural disasters and climate change
Conclusion
 
Part II – Sustainable development and commercial opportunities
 
Chapter 4 – Food security—agriculture and fisheries (PDF 680KB)
Food security
Sustainable development
Fisheries
Coastal fisheries
Commercial fisheries
Conclusion
 
Chapter 5 – Forestry and mining (PDF 209KB)
Forestry
Forests and sustainable development
Mining
Sustainable development, natural disasters and climate change
Conclusion
 
Chapter 6 – Australia’s assistance—sustainable development (PDF 831KB)
Food security
Agriculture—research, development and capacity building
Fisheries—research, development and capacity building
Forestry
Minimising the effects of natural disasters and climate change
Conclusion
 
Chapter 7 – Opportunities for commercial development (PDF 242KB)
Cash crops
Impediments to commercial production
Quality of produce and reliability of supply
Quarantine restrictions
Business management skills
Marketing and negotiation skills
Mining—expanding export earnings
Tourism
Conclusion
 
Chapter 8 – Australia’s assistance—expanding markets (PDF 98KB)
Research and development
Non-tariff barriers
Trade negotiation skills
Mining
Tourism
Pacific Investment Commissioner
Conclusion
 
Chapter 9 – Business environment—infrastructure (PDF 632KB)
State of infrastructure
Telecommunications
Aviation
Australia’s assistance
 
Chapter 10 – Education and training (PDF 231KB)
Skills shortages and unskilled workforce
Impediments to higher educational standards
Conclusion
 
Chapter 11 – Australia’s assistance—education and training (PDF 923KB)
Regional initiatives
Australia’s engagement in Pacific education and training
Donors
Review of Australia’s assistance to education and training in the region
 
Chapter 12 – Workforce (PDF 98KB)
Employment in Pacific island countries
Unemployment and underemployment
Opportunities for job creation
Conclusion
 
Chapter 13 – Australia’s response to unemployment (PDF 245KB)
Pacific Seasonal Labour Pilot Scheme
Benefits of the scheme
Concerns about the scheme
Suggested improvements
Evaluation
Conclusion
 
Chapter 14 – Economic management and state institutions (PDF 98KB)
Public administration and economic performance
Capacity to deliver essential services
Financial management
Conclusion
 
Chapter 15 – Australia’s assistance—strengthening governance (PDF 103KB)
Effective administration
Public sector capacity
Key institutions—oversight and accountability
Parliamentary oversight
Policy coherence
 
Chapter 16 – Private sector—driver of economic growth (PDF 113KB)
Encouraging private enterprise
Ease of doing business
Capacity to reform regulatory environment
Control of corruption
Law and order and political stability
Summary
Australia’s assistance
 
Chapter 17 – Land tenure and access to finance (PDF 859KB)
Land ownership—obstacles to development
Australia’s assistance
Access to credit and financial services
Australia’s assistance
 
Part III – Effectiveness of Australia’s assistance to the region
 
Chapter 18 – Effectiveness of Australian aid—policy framework (PDF 139KB)
Australian official development assistance to the Pacific
Priorities
Capacity building and institutional strengthening
Continuity of funding
Ownership and complementarity
Other donor countries
NGOs
Strategic planning
Statistics
Measuring effectiveness—Office of Development Effectiveness
 
Chapter 19 – Pacific Partnerships for Development (PDF 82KB)
Priorities and commitments
Implementation
Collaboration
Coordination with other donors
Potential
Evaluation
Conclusion
 
Chapter 20 – Australia’s development assistance—on the ground (PDF 98KB)
Technical assistance
Institutional strengthening
Training and preparedness
Conclusion
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4 thoughts on “Economic and security challenges facing PNG and the Pacific Islands

  1. There has been little media coverage of this important report, however yesterday Radio Australia interviewed the committee chairman, Senator Trood…

    Australian Senate report on Pacific Security

    Updated February 25, 2010 17:51:16

    An Australian Senate inquiry has found that if Papua New Guinea and the Pacific Island states did more to grow their economies, their security capacity and outlook would be better. The Foreign Affairs, Defence and Trade References Committee has held a long inquiry into economic and security issues in the region, and its latest findings are the second part of its two part report. In its economic findings last November, it pointed the finger in part at Pacific states for allowing human capital to languish, agricultural productivity to decline and adverse business and investment climates to persist. Now, the committee’s found that development shortcomings contribute to the region’s long list of security problems.

    Presenter: Linda Mottram abcwire.send-mungmung.rapb
    Speaker: Senator Russell Trood, chair of Australian Senate Foreign Affairs, Defence and Trade References Committee

    MOTTRAM: The report paints a picture of a region beset by security challenges. The committee’s chair is Liberal Senator Russell Trood.

    TROOD: The list of security challenges now faced by the region is depressingly long. It includes the breakdown of domestic law and order, transnational crime including smugling and money laundering, illegal fishing resulting in serious resource depletion, a high vulnerability to natural disasters and a potentially wide exposure to the dangers of climate change. The committee found that the island states had a limited capacity to respond effectively to many of these challenges. Their law enforcement mechanisms were limited, their capacity for effective border control overstretched, regulatory and administrative frameworks are under-developed, and their ability to respond to natural emergencies limited by weak infrastructure and an absence of financial reserves.

    MOTTRAM: The report also points to a complex mix of domestic obstacles the limit Pacific states capacity to deal with security issues .. persistent matters such as unemployment, inter-ethnic tension, land tenure issues, gender inequality and political instability.

    Australia has a wide range of security related programs in the region, which the committee sees in a largely positive light. It calls for the widening of some .. like the Pacific Patrol Boat Program and a weapons security initiative .. while it suggests some new efforts, like the establishment of a Regional Maritime Co-ordination Centre. There are also recommendations for broadening and deepening co-operation and co-ordination. And it calls for developing security partnerships. Australia’s police, defence force, customs and border service, and AusAID are among the many institutions working on Pacific security programs, which gave evidence to the committee’s hearings.

    But the overarching question is why the security issues persist. Russell Trood told the Senate upon tabling the report that the committee found there is a close connection between security and development.

    TROOD: Indeed Mr Acting Deputy President, the committee is strongly of the view that were all of the recommendations in volume one of its report to be implemented, it would greatly enhance their security and improve their capacity to meet security challenges that they face into the future.

    MOTTRAM: Volume one of the committee’s report focussed on economic development issues. And it found that despite years of external assistance, Pacific states are themselves are responsible to some degree for continuing economic shortcomings.

    In that report, the committee pointed to a lack of investment by Pacific states in human capital .. kids not at school, workers not trained appropriately; it highlighted dramatic slides in agricultural productivity; and it found Pacific states had generally not done what’s required to encourage development and investment in their economies. And that’s on top of natural constraints like geography, population and technological limitations.

    Overall, Senator Trood says the situation in PNG and the states of the southwest Pacific is likel to remain dire for the foreseeable future and in need of external assistance for decades to come.

    Then, on top of all that, the committee notes the big, evolving security issue .. climate change.

    Russell Trood again.

    TROOD: At the moment these countries are under-prepared for these challenges. They are not likely to diminish and accordingly will probably demand considerable attention from external partners such as Australia.

  2. What this report highlights is a real need for a partnership arrangement between our regional neighbours. This partnership must however be on an equal footing. That concept appears to be at odds with the current way of thinking whereby there are ‘donors’ and ‘recipients’. The South Pacific Forum has been unable to sort out the differences between participating countries and is riven by local issues. It can’t seem to take the ‘helicopter view’ of the forest and keeps tripping over individual trees. What is lacking is real leadership.

    A joint Maritime Authority sounds like an excellent way to go however who would it answer to and if disputes over sovereignty arose, who would adjudicate? What we don’t need is another European Parliament with more politicians and public servants with their snouts in the trough, so to speak.

    Whatever happened to the notion of regional solidarity? I suspect that those outside our region may well find it ‘on the nose’ and are taking a particular interest in ensuring it won’t happen, presumably for reasons stemming from their own agendas.

  3. Good point Paul.

    Co-operation in the case of PNG and Australia is occurring but seems to be “below the radar”. I was in Kavieng 2 years ago and there were quite a few Oz and Indonesian sailors in town. They were doing a joint exercise in maritime surveillance with PNG defence to try and stop illegal fishing. There was no media publicity about this at the time. I suspect defence forces who have known and got along with each other for many years just go ahead and do thing without a great political hue and cry.

    I also had a long chat with the pilot of the CASA aircraft that spirited Julian Moti to the Solomons (he as a tambu of a friend of mine). They’d been trained to do just this sort of covert operation by Australian special forces. He met his Australian trainer after the event. He congratulated the PNG pilot on a job well done, even though it was politically unacceptable and possibly illegal (this was in the Howard years when relations were strained). The pilot said they knew Aus defence were tracking them on long-range radar and had intercepted their communications, but were treating it all as a bit of a game!

    So there is some solidarity amongst the grunts who have worked together even though the Pollies make a big song and dance about the high-level stuff!

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