How can PNG fight the resource curse?

Written by Matthew Morris on May 27, 2011

Papua New Guinea is on the brink of it’s biggest resources boom. Will it be a curse or a blessing?

A new generation of mining projects and a massive LNG project are expected to double the size of the economy over the next decade. Yet there is skepticism about whether benefits will be shared widely among the nation’s seven million people. This is the third resource boom in as many decades, and despite the promises of the past, incomes today are barely higher than they were at independence in 1975 and PNG is unlikely to meet any of the MDGs.

Some argue that PNG has a classic case of the resource curse: Dutch Disease, weak accountability and corruption, which all conspire to undermine economic, social and political development. A key question is how to break with this past experience and chart a new development path?

The economic debate on managing PNG’s next resource boom has focused on three areas:

  1. The design of a savings mechanism, such as a sovereign wealth fund, to manage the macroeconomic effects, such as Dutch Disease and revenue volatility. (If you want to read more on this, the 2011 Budget has a good update on the LNG project and the proposed sovereign wealth fund.)
  2. The formulation of medium and long term development (and expenditure) plans on how to translate resource revenues into infrastructure and basic services. The PNG Department of National Planning and Monitoring provided a detailed overview of these plans for the Development Policy blog.
  3. A debate about governance: the accountability, capability and effectiveness of government to deliver on its promises. This is reflected in some of the comments from Paul Barker at the Institute of National Affairs, and also featured here and here on the Development Policy blog.

My view is that Dutch Disease and absorptive capacity aren’t the main problem. A great deal is already known about how to manage these, both in the context of scaling-up aid inflows and managing resources booms. (For more of this read Owen Barder’s paper on scaling-up aid and Menachem Katz’s book on managing the oil curse in Africa.)

Nor do I think a lack of planning is a big problem for PNG. The government has both long term and medium term development plans and a raft of sector and thematic plans, including one for the informal economy. We can debate whether or not these focus on the right policies, but most commentators would agree that the main problem is a lack of implementation.

There needs to be debate about and fine-tuning of macroeconomic policies and development plans, but the challenge is how to implement them and that brings us to the issue of governance, and the potentially corrosive impact of resource revenues on accountability, transparency and government capability in the delivery of services.

During the latest resources boom, indicators of the quality of governance declined. PNG is now in the bottom 5% of countries in terms of control of corruption. We need a lot more ideas on how to improve the accountability, transparency and government capability if we are to reverse this trend.

This includes evaluating existing approaches, such as aid, to improving governance. For example, a recent review Australian aid to PNG found that ‘several sources of evidence, from the decline in national governance indicators to a wealth of evaluation materials, and international analysis as well, suggest that the “capacity building through advisers” model is not working.’ If aid is not the panacea, then what?

There isn’t a single solution. Ultimately the key drivers need to come from within PNG and not from donors. There needs to be more debate about how to create the conditions for the emergence of stronger accountability, transparency and capability. The key to this is empowering citizens to hold government to account.

One idea is to share the benefits of the resources boom more widely and create a stronger constituency for government accountability. In an article for the National Research Institute, Ron Duncan picked up Todd Moss’ Oil to Cash idea and suggested that an ‘Alaska model’ of universal cash transfers could be implemented in PNG.

Of course, implementing universal cash transfers is easier said than done, though not beyond the realm of possibility. The government is already considering a unique ID card program that could be used to identify beneficiaries, and rapid progress in rolling out mobile telecommunications could provide a cheap platform for making payments. It’s something that deserves further consideration. And in the meantime, there are other ways to share benefits more broadly. The 2002 free education program was positive: more money reached schools and enrollments increased.

Another idea relates to how to empower citizens to hold governments accountable, and to enable governments to get better information to feed into policy.

Opinion polls in Australia provide this kind of feedback to political leaders. While sophisticated instruments like this are not yet available in PNG, there are alternatives. During the current sitting of Parliament, Sam Basil, the deputy opposition leader, posted a picture on Facebook of an empty parliament chamber. Within just an hour more than 50 people had posted comments of dismay at the performance of MPs, and by the end of the day there were over 100 comments.

A similar approach to feedback can be applied to service delivery. A toll free text message might be sent to inform providers about whether services are reaching intended beneficiaries. We are already seeing the start of this kind of community involvement with people posting photos of potholes in Lae on Facebook. An SMS-based platform would make it easier for people in rural areas to participate. Information can then be used by advocacy groups, government or aid agencies to improve service delivery. (For more on this see this recent post on crowdsourcing.)

Finally, what can be done to improve transparency? PNG has quite detailed budget documents, but where the money actually goes is less clear, a problem that is highlighted in the Parliamentary Accounts Committee’s scathing comments. And there are other areas where more transparency is needed. PNG is not yet a signatory to the Natural Resources Charter or the Extractive Industries Transparency Initiative, global standards for publishing revenues from the resources sector. Despite a great deal of donor support, the statistics office has a poor record of conducting and publishing statistical surveys on things like demographics, health and households incomes. Government has already done the hard yards of collecting this data, perhaps all that is needed is a nudge to get it into the public domain.

These are some suggestions about how to  improve governance. Its naive to think that improvements will be easy or that they will happen automatically. A concerted effort by all stakeholders – government, donors, NGOs and citizens – is needed. Fortunately, information and new technologies are creating opportunities for change: from cash transfers, to crowdsourcing feedback, to social networks for advocacy. As Rowan Callick commented in a recent article, if PNG and its supporters have the commitment to chart a new development path, the country can be ‘wired for change‘.

Matt Morris is the Deputy Director of the Development Policy Centre at ANU’s Crawford School.

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7 thoughts on “How can PNG fight the resource curse?

  1. I was just about to write simmilar sentiments that Matt wrote. The underlying issue, I believe, is governance of the resources especially the preceeds from the projects. However lets not stop there, lets move further back (root-cause) and identify the main instigator. After identifying the root causes, Department and line-bodies concerned should be tasked to establish programs in response to these issues identified.

    We may already have some of these programs/policies in place – pay increment for public servants, ‘talk’ of housing, etc however we are not seeing the impact on the corruption in governance.

    It is very critical to act now than ever because the number of resources we are developing is ‘frightening’. If we do not get a tight grip and order in the governance or implementation side of things than whats the point in making so many ambitious plans – Vision 2050, MTDP, etc.

    To conclude, I do not think we need that many Extractive projects in the country. We only need four or three be better. It is how we govern the resources that is important not necessarily how many projects we have. A bigger part of our effort should be in Bio industries.

  2. Absolutely JoshiuaGEN, last year I was able to travel to several Pacific Island countries and none of them have had or will ever have the resources available to PNG. Yet they are able to have cleaner towns, more educated citizens and generally more progressive implementation results.

    Why? I can only put it down to a difference in attitude and culture. They’ve just worked within their means.

    I do realise that PNG is vastly bigger and more culturally diverse, but as an example do we really need to have people sitting in filth selling betelnut directly from the dusty ground at Gordons market? How and when did we accept that it was okay to conduct your daily life like this?

    Simply put, something is missing in our attitude to life in PNG.

    1. The way I see it the City Council and the Government in consultation with the Port Moresby Tax payers have a public forum about How To and keep it clean.Also the authorities would then take the message to the churches, settlements,schools,colleges, even in the offices in every facets of life in the city.Yes,it will take money,but surely with the boom and the hype of business activities going on in Pom a million or more kina can be found to do this .Port Moresby can be changed but it needs everyones effort.

      Our problem since independance has been lack of implemetation of policies and to see it through.Also the willingness of the varies peoples to work together to make our Capital clean and liveable.Maybe it is a big ask but what esle can work?Maybe we are ok with living with the filt and dirt!

      Maybe there should be plenty of talk back shows where we can air our frastrations and the Authorities just sit there and listen and take note of what is being said etc.Where there is a will there is a way,shall we?

  3. I got carried away talking about the filt in Pom but the overall point I was trying to convey was that people are too busy with the Boom that is happening and are not thinking patriotically about their country anything. From the elected member of parliament down,everybody is in to make a money and lots of it, they loose sight of the big issue Papua New Guineans.

    The boom has been a curse becuse the masses are not THERE with the FEW who are gathering most of the money themselves,and may I say in illegal deals here and all over the world.
    The Government of the day do not have the National’s best interest at heart instead they have their own at heart;hence the illegal deals that are so obvious before you and me.
    I am a Patriotic Nationalist individual and it is so heart breaking to see what is happening to my Country Papua New Guinea.Somebody please get us out from this quagmire.

  4. Judy, it’s people like you, Manu, myself and the like-minded papua new guineans that will see Change take place (for the better). I doubt a Chinaman (no hard feelings to the naturalised citizens…some did great to build PNG) will step in the shoes we are trying to wear – this is PNG, our home. When the chainsaw stops, when the mining shovel stops, when the oil drill stops, when the tuna is depleted, you and I will be the only ones left; Wairas will be seen no more. we will be the ones to face the brunt of Development/Sabotage?? (not sure which one)

    You said it well, where there is a will, there is a way. And to top it of nobody knows PNG better than us. So being an educated papua new guinean patriot, we have all the arsenal. Let’s continue to spread the word – there is no need to get filthy rich at the cost of a fellow countryman.

    One thing I am sure about is that when ‘Righteous rule, people rejoice’ – that’s a Proverb from the Bible. And persistence pays. Let’s keep on pressing.

    wanbel stap countryman tasol!!

    1. JoshuaGen it frastrates me no end but we just have to continue tapping on this keys;educated PNGs can read and assese for themselves.For a while I gave up blogging but my angst has got the hold of me and I am back.As you know english is not tokples so at times there is errors,or cant find the right terminology and the constant referal to the dictionary takes time. But the love of my motherland beacons me to put my two bob in ,and as others have said ,go on waffling.

      I am not against the chinese who were with PNGs from before Independance but others who heard about the Boom and have come by the plane load and through our “back doors”.They cant even speak basic english,but they are everywhere even in boarder of southern highlands and Gogodala people in the Gulf,closer to Kiunga .What are they doing there, in the jungle? There is exploration going on there and money is there.How did this mainland chinaman get there and now as a tucker shop!He is carried along by the exploration,they bring his cargo when the company bring their cargo.The local people go and spent their royality payments there and the cycle goes on.

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