PNG has become the prime real estate in the big geopolitical rivalry in the Pacific.
In a short span of time, the prime ministers of India and Australia, the presidents of Indonesia and France, US Secretary of State and Secretary of Defence, and Chinese envoys have all paid visits to PNG. Even the Pacific leaders descended on Port Moresby when Biden’s now cancelled visit was announced.
Why is PNG a very important piece of real estate in the region?
Four factors:
Geographical location in the Pacific
PNG is the buffer between the formerly communist part of the world, which turned to authoritarianism and now having mixed successes with democracy – the Asian region – and democracies of New Zealand and Australia.
PNG is also geostrategically located between the largest Muslim country in the world in Indonesia, the quintessential enemy of the West in China, and a irrational nuclear loving dictator up north in the Korean Peninsula.
World War II has shown that in a war that involves an Asian country and the West, the battle will be won or lost on PNG soil.
PNG was the buffer between Asian and Southeast Asian countries that fell to the communist dominio effect.
And with the perception that terrorism is associated with the Muslim religion, PNG becomes important in containing Indonesia, the world’s largest Muslim population.
PNG’s leadership in the Pacific
Apart from Fiji, PNG is the most dominant player in the Pacific islands regional institutions. PNG is is the Big Brother among the Melanesian Spearhead Group (MSG). PNG is is a very influential member of the Pacific Islands Forum. To gain regional influence, every country that is interested in the Pacific are courting PNG.
Multinational Companies
PNG’s natural resources attracts established multinational companies from ExxonMobil to Total. Countries investing in PNG include US, Australia, China, France, Japan, and many more.
If for nothing, these world superpowers would still be interested in PNG because of their companies’ investments.
Poor and weak
Despite its rich natural resource endowments, PNG is poor, and has weak institutions. Due to the extractive and enclave nature of the resource companies, most of the proceeds of these mines and LNG companies are siphoned out of the country, leaving the populace to fight over fragments.
It’s weak institutions makes it vulnerable to exploitation.
The foreign powers then offer PNG resources and support that are irresistible. China offers loans, US provides resources to monitor PNG maritime borders against transnational crimes and illegal fishing. Australia and IMF provide grants and further loans.
For everything these superpowers give to PNG, it comes with conditions that advances their interests.
Intertwined: Geopolitics, access, commercial
So why are powerful countries interested in the PNG?
The answer would be: a combination of all the factors listed above. China wants to get a strong foothold in the Pacific. PNG’s geographical position, it’s influence among the Pacific island countries, and it’s vast population makes it the most important Pacific country. The United States, Australia, New Zealand, France and Japan are all interested in PNG for the same reason. Gaining access to a geostrategically important piece of real estate.
It’s also commercial. PNG has massive natural resources. LNG is becoming the more important since the Russian invasion of Ukraine caused fuel prices to skyrocket, but also with the emphasis on moving away from coal and oil. LNG has relatively less carbon emissions than oil and coal.
The opportunity to gain access in PNG presents itself in the form of a poor nation with vulnerable institutions and weak capabilities needing help.
Many have criticised a recent post on the awarding the PNG VC trophy to Unitech without a finals being played. But the main message of the post was how rules are bent in PNG at their convenience, and then rationalised after the fact. Sadly many missed the main message. So here’s another example of bending the rules in PNG:
Last month the Constitutional Law Reform Commission (CLRC) completed a nationwide consultation gauging views on whether the prime minister should be elected directly by the people as in a presidential system. The directive to do this came from the national government.
Why the need to change the current system?
Because the government thinks that the unicameral parliamentary system is “not working”?
The obvious question therefore is: is the current parliamentary system not working for PNG because it’s a bad system, or because PNG is not using the parliamentary system as it is supposed to be used?
The latter is true. You see, in a parliamentary system elsewhere, the politicians (MPs) are lawmakers. They are NOT service deliverers! In PNG, MPs are both lawmakers and service deliverers.
Why does this dual role matter?
Because MPs are more concerned with their service delivery roles whilst their lawmaking responsibilities suffer. In 2020, 500kg of cocaine was discovered on the outskirts of Port Moresby when the plane carrying it crashed. The pilot and those involved couldn’t be charged because cocaine at the time was not regarded an “illicit drug” by PNG’s Drug Act 1954. Imagine having a law that was outdated by more than half a century.
A year later, meth was discovered. Again, the person producing it couldn’t be charged because the Drug Act 1954 didn’t recognise meth as an illicit drug.
It gets worse: we have 370 laws in PNG, according to CLRC, that are outdated by more than half a century, and of no practical use.
Whose role is it to update these laws? Your politicians.
Why aren’t they updating it? Because they are busy delivering services.
Is delivering services the MPs role? NO
Who gave MPs the additional service delivery role? The MPs themselves. They amended the organic law in 1995, and then created the District Development Act in 2014, to make themselves service deliverers.
About K1. 5 billion is given to these MPs to deliver services. K10 million to Open MPs every year, and K5 million times the number of Districts to the Governors. These funds are commonly known in PNG as DSIP/PSIP funds.
How is the service delivery in your provinces now that your MPs are controlling more than a billion Kina?
The Auditor General this year said only 40% of the MPs submitted acquittals for the millions they spend the year before. The rest didn’t. And even for those who acquitted, we have not idea whether projects were actually implemented.
You see your MPs switching from one side of the parliament to another. Why do they do this? Because they want to be on the side of the government, which controls the DSIP/PSIP.
Your MPs have no interest in making laws, providing representation in parliament, or holding the government accountable. They made themselves services deliverers, and instead of making laws, they pride themselves in delivering services. With very low to no accountability, they spend millions through DSIP/PSIP. When they don’t have enough, they borrow and plunge the country into more debt. To get the loans, the give into conditions set by the institutions offering these loans, like the IMF.
So if you’re supporting “bending of rules” or “bending of accepted norms and conventions”, you should be happy with:
Kina devaluation
uncontrollable debts
Lack of service delivery
corrupt MPs misusing funds
outdated laws
escalating crime
The parliamentary system is not working because it’s conventions are not being followed. Now the government wants a presidential style of electing your prime minister? Nothing will stop the presidential styled prime minister from bending more rules now that he is not subject to a vote of no confidence.
We shouldn’t condone bending of rules and conventions. Whether it’s traffic rules, VC’s CUP finals, or what the role of the MPs should be.
We have a tendency to bend the rules, and when it doesn’t work, we say it was introduced by the white man. And then we bend the new system we adopt, and when it doesn’t work we blame the consultants who advised us.
We are a country that refuses to accept accountability. We rationalise our way out of every mess. We support our tribes and schools and communities against the most basic and illogical mistakes.
This country is being plundered not by foreigners (if foreigners are involved, it’s with the permission of rule bending Papua New Guineans), but by its own citizens who have no regard for rules and conventions. This country is in a mess because everyone from politicians to the streets bend the rules.
The Stanley Hotel in Port Moresby advertised that they would be holding a ‘walk-in’ interview for about 100 positions. More than 2000 showed up for the interview in early February 2023, and stood in line for hours soaked in the pouring rain. This comes after about 20, 000 applied for just 576 positions advertised by the PNG Police Department at the end of 2022. PNG SEEKJOB website, an online recruitment portal reports that 86, 262 applicants have registered for just 213 jobs advertised, and the site has 110, 000 visits per month. These statistics gives a snap-shot of the level of unemployment in a country of about nine million. What consequences lie ahead is anybody’s guess, but definitely not a good one. The PNG Trade Union Congress President called the unemployment rate a “ticking time bomb.’
Whereas the private sector is the largest employer in many countries, in PNG, the state is the major employer. The state employs about 700, 000 people, whilst the private sector employs an estimated 260, 000 people (2020 estimates). The troubling news is that not only are there limited employment opportunities: there are more and more people losing their jobs as this study shows. Period for which data is available shows that there were about 305, 000 people employed in the private formal sector in 2013, but dropped to about 260, 000 in 2020. As Figure 1 below shows, this drop started before COVID-19, so COVID-19 is not the sole reason for unemployment.
The problem in PNG is threefold: first, the government focuses more on the mineral and extractive sector which provides minimum employment opportunities; second, the business environment in PNG has deteriorated significantly; and third, the COVID-19 has stunned economic growth world-wide – PNG is no exception. Below we look at each point.
Mineral sector = low employment
According to World Bank data, Papua New Guinea is the tenth most resource intensive economy in the world. Guys from Devpolicy say that “measure of underground resource rents (profits from oil, gas, coal and minerals) as a percentage of GDP, out of 205 countries puts PNG tenth at 19.3%, just below Saudi Arabia at 20%. By comparison, the global average is only 1.5%.” PNG’s economy relies on extractive industries (PNG LNG, OK Tedi etc).
Why is this a problem for PNG?
This is a problem because the resource sector employs less people than manufacturing and service sectors. Case in point is the PNG Exxon Mobil Project. According to its website, PNG Exxon Mobil, a LNG company, employs around 3,200 people, 86 percent are Papua New Guineans. Exxon Mobil’s market cap is $460 billion or K1, 643 billion.
East New Britain Oil Pam Company (ENBPO), on the other hand, employs 25, 000 people, of which only 106 are expatriates – the rest are Papua New Guineans. How much ENBPO is worth is not known, but there was a K4.319 billion bid to buy the company in 2014. This amount was the market value or how much ENBPO was worth at the time. ENBPO engages in planting and manufacturing Palm Oil products in PNG.
As these two cases show, ENBPO Company employs about seven (7) times more Papua New Guineans than Exxon Mobil. Exxon Mobil, whose worth is about 410 times bigger than ENBPO employs less people.
Why are the differences in employment so big?
Because Exxon Mobil is a company that requires more machines to do its drilling and other related jobs, whilst ENBPO needs more humans to do every things from planting, and harvesting to manufacturing. These manufacturing companies are low-skilled and labour intensive. This simply means they employ people with low education, and need more people than machinery to do the work.
Another manufacturing sector that employs many Papua New Guineans is the tuna canneries. The seven tuna canneries in PNG employ more than 10, 000 people.
The obsession of PNG politicians with minerals companies means there is more focus on the sector (mineral resource sector) that employ less people. The neglect of manufacturing companies means the sector (manufacturing) that present the highest employment opportunities in PNG is neglected. Worse still, tax holidays given to mineral companies results in low revenues coming into the state coffers. The services sector such as tourism is also labour intensive, and provides more employment than the mineral sector.
Poor Business Environment
The second factor is the poor business environment in PNG. The World Bank used to produce an annual survey on the “ease of doing business” where it ranked 190 countries based on how easy it was to start and sustain small to medium enterprises or SMEs (was discontinued since 2020 after revelations that WB manipulated data for China to make it look good). The last report on PNG was published in 2020, and can be accessed on World Bank website. There are 11 indicators, and a country is ranked out of 190 – with number 1 being the best. By 2020, PNG ranked in the top 50s in only one indicator – getting credit – where it ranked 47 out of 190, whilst the worst was enforcing contract, where it ranked 173 out of 190. Overall, PNG ranked 120 out of 190. Any aspiring entrepreneur or SME owner will tell you how hard it is to meet the requirements of starting a business in PNG.
An important consideration for businesses that the Work Bank report did not sufficiently cover is the debilitating law and order problems in PNG. According to World Population Review, PNG ranks second in the world index of countries with the highest crime rate in 2023. Overall crime rate is calculated by dividing the total number of reported crimes of any kind by the total population, then multiplying the result by 100,000 (because crime rate is typically reported as X number of crimes per 100,000 people). Only Venezuela beats PNG in the number one position. With a crime rate like this, businesses, especially foreign companies, will not invest in PNG. No investment means no jobs.
Other constraints include poor government policies such as currency rationing. Case in point of such policies is the Puma-Bank of PNG-Air Niugini saga in early 2023. In the first week of January 2023, Air Niugini flights were grounded because Puma Company, which supplies the aviation fuel Jet A1, did not supply the fuel to Air Niugini. Puma’s argument was that it did not have enough foreign currency to import the A1 fuel. The Bank of PNG controls the amount of foreign currency (FX) given to companies. In this case, it placed limits FX Puma requested – or rationed foreign currency. FX rationing has been an ongoing problem in PNG. If businesses are affected, employment is affected. There are other factors such as the level and quality of literacy in the country that contributes to low investment in PNG.
COVID-19
COVID-19 as a cause for unemployment is self-explanatory. COVID-19 has affected businesses world-wide, and PNG is no exception. The difficulties businesses face range from social distancing requirements, and low demands, to increasing costs of doing business. Struggling businesses lay off workers. An article on Devpolicy estimates that about 10, 000 jobs were lost in PNG in 2020. Whether this has recovered is not clear.
Conclusion
There may be many factors, but the three discussed above, in my view, are the main causes for high unemployment in PNG. Addressing these problems will take a government that is serious, and is not afraid of making unpopular decisions.
Once again, the Opposition is trying to mislead the people of PNG. A number of their recent statements claim that PNG is printing money to fund the budget deficit, stated the Minister Assisting the Prime Minister on Treasury Matters, Ian Ling-Stuckey.
“This is just wrong.The IMF verifies this is wrong. It is a condition in the IMF program that PNG does not print money to finance the deficit. When we pass an IMF review, as we have just done again with the recent IMF mission, this means we have not printed money. This is not an imposed condition from outside – it is a condition that the Marape-Rosso Government believes in. And once this claim of printing money is proven to be false, then the rest of their arguments collapse with no credibility.
“Of course, the new Opposition may be remembering the disastrous budget management of their old Opposition friends. PNG did print money – known as the “slack” arrangement during 2014 to 2016. This was at a time when economic mismanagement had led to a massive blowout in budget deficits – from a planned budget surplus in 2012 to a budget deficit of K3,278m or 10.4% of GDP in 2013, K3,579m or 9.5% of GDP in 2014, K2,785m or 7.0% of GDP in 2015 and K3,087m in 2016. No budget repair going on through those years! The only trick in 2017 was to revalue the size of GDP by 50% – just made their budget deficit to GDP figures look just a little bit better.
“These high deficits and rapidly growing debt, which was 2.5 times larger in just 4 years, meant the O’Neill government was struggling to finance such huge deficits. Domestic interest costs had risen to over 12% for government bonds, there was no credible budget repair program in place to attract low-cost international financing, Treasury Bond auctions kept failing. Reports suggest the Government at the time forced BPNG to start printing money, even though it was probably illegal for them to do so.
“In contrast to the above desperate situation, the budget is now in a much better position. Domestic interest costs on government bonds have dropped from 12% to 6%. There is a credible and performing 13 Year Budget Repair Plan that has reduced the debt to GDP ratio from 8.9% of GDP in 2020 during COVID, down to 4.3% in 2023 and on track for a surplus by 2027. Treasury Bond financing was regularly oversubscribed during 2023 despite offering lower interest rates, and we are well ahead of pro-rata raisings in 2024. The Marape Government introduced changes to the Central Banking Act which made very clear that printing money in times such as 2014 to 2016 is illegal. Absolute limits on the size of BPNG holdings of government securities have been introduced and put into the new CBA laws. These are being monitored by the independent IMF.
“The Marape-Rosso Government worked hard to fix the errors of the previous government. The performance over the last five years is so much better. The Opposition claims we should exercise fiscal restraint. We are. We are cutting the budget deficit by a billion Kina a year. PNG’s rate of budget repair is ranked in the top 10% of all countries in the world. This is the right balance between repairing the budget, and not causing unnecessary hardship to our families by cutting even harder. The Marape-Rosso Government understands the budget problem, and has demonstrated the courage to deal with it.”
Hon. Ian Ling-Stuckey, CMG. MP Minister Assisting the Prime Minister on Treasury Matters 12 May 2024
PM Marape in his response to the concerns raised by our ordinary people affected by rising cost of living due to the effects of the depreciating Kina and inflation leaves much to be desired.
The biggest contributor to inflation and the depreciation of the Kina in the last 5 years is the fiscal behaviour of the national government.
We have been boasting about consecutive record government budgets and we never speak of undisciplined Government expenditure funded from printing money. If a record budget does not strengthen the economy then its size does not matter.
By increasing the money supply within the local economy without the backing of a strong economy the Government has essentially oversupplied Kina thereby rendering it worthless. This is the net effect of printing money. Printing money only works in large diverse economies. Our economy is too resources reliant and susceptible to external shocks.
Whats happening is that all costs are going up and government is unwilling or unable to increase wages to off set inflation. Inflation is running at around 5% a year, so adjusting wages upwards every year is unsustainable without a corresponding increase in productivity. Also giving free handouts to the people is not a smart longterm solution.
Meanwhile, the Central Bank is struggling to control the rapid decline in the value of the Kina so that it can contain runaway inflation.
The PM is telling everyone that we have to wait for the big mining and oil and gas extraction to commence operating inorder for the people to get some relief. Are we back to short term pain for long term gain again?
If we had cut back government spending on wasteful projects by an additional billion kina a year, that would have meant K5b less in printed money.
If we had allowed Porgera to operate, that would have meant an additional $6b in FX we would not have had to borrow. Not to mention it’s multiplier effect on other businesses. That’s what the PNG economy is experiencing.
Unfortunately our Government has borrowed K32 billion in 5 years. This number equals all borrowings by all Governments since 1975. Our total official debt is K64 billion and half of that was borrowed in the last 5 years.
PMJM tells us GDP grew by K30b since he took office. Well debt grew by K32b in the same period. This does not include other debts currently sitting off the books.
The fix is simple but it will require strong political will to do it. We must first live within our means. Stop looking for ways to borrow money to fund all kinds of low return initiatives Good government is about spending for the collective interest, not on narrow political interests.
Second, we must rescind the decision to create elite capture mechanisms like KPHL. Bring in the Sovereign Wealth Structure and start putting real money into it and keep it in the Central Bank to provide stability and back stopping for the Kina. Whats the point of boasting about K12b in FX Reserves when your total debt is K64 billion and half of that is foreign denominated loans?
Given our lack of economic diversification, we are susceptible to external shocks and this can significantly affect the currency flows into our economy.
We must manage our economy with prudence and not expect some windfall revenue in the future to rescue us. This practice of gambing on future revenue by borrowing and expending today on projects with dubious returns is exactly why we are in trouble now.
PNG needs to tighten its expenditure and exercise fiscal restraint. We need leaders who understand the problem and have the courage to deal with it.
Our people cannot absorb any more pain. It seems only the cocoa growers are exempt from the struggle for now but every other PNGan is feeling the pinch.
NAMAH CONDEMNS UTTERANCES BY USA PRESIDENT JOE BIDEN
Press Statement 3rd April, 2024
The Chairman of Parliament Committee on Foreign Affairs, International Trade, Immigration & Defence and Member for Vanimo Green River Electorate, Hon. Belden Norman Namah has condemned utterances by the United States President Joe Biden describing a situation in WWII where his uncle was shot down and eaten by cannibals in New Guinea.
First of all, there is no such country called New Guinea in the Pacific.
But if President Biden was referring to Papua New Guinea, Mr. Namah said “President Biden’s utterances are unfounded, unacceptable and utterly disrespectful to the Independent State of Papua New Guinea and her people. The truth about the fate of his uncle Ambrose has never been established and President Biden knows that. Yet he chose to reverberate the mystery with cannibalism. This is no slip of the tongue.”
For Prime Minister Marape to say it may have been a slip of the tongue is not only an understatement but also an irresponsible statement unbecoming of the Head of the Government of Papua New Guinea.
Clearly, Marape failed to condemn the despicable words from President Joe Biden. He instead chose to speak for Biden saying it may have been a slip of the tongue. “Speak for yourself and your Country, Prime Minister”, said Mr. Namah.
Mr. Namah further added that Marape’s calls for USA to help clear its WWII mess is a kneejerk reaction and shows that he is not aware of the “Render Safe Programme” that has been ongoing in the Country to rid our communities of unexploded WWII ordinances.
Mr. Namah said “there’s a lot to be desired from the conduct of James Marape as the Chief State Diplomat. Its even laughable “wheezy whassy diplomacy” to say the worst. Recently he came to the defence of his Foreign Minister who apparently labeled Papua New Guineans as primitive animals”.
“Stand up for your Country and People, Prime Minister, and defend Papua New Guinea at all cost without fear or favor,” said Mr. Namah.
……………………………………………… Hon. Belden Norman Namah, MP Member for Vanimo Green River Open Electorate & Chairman of Parliament Committee on Foreign Affairs, International Trade, Immigration & Defence
Following US President Joe Biden’s claims that his uncle Bosie was eaten by cannibals in PNG, the U.S. Embassy – Port Moresby, Papua New Guinea issued a statement without an apology. Thousands in PNG have taken it to the social media calling for an apology, it’s looks like there won’t be any, and here’s why:
The Embassy only says what the US president and White House say. Joe Biden referred to cannibalism twice at two different places last week. Neither Biden nor the White House have retracted the claims of Biden’s uncle eaten by cannibals.
Basically, Biden doesn’t want to apologise, the US Embassy in PNG therefore cannot apologise.
Why cannot Joe Biden apologise?
There are two possible reasons:
First, Joe Biden truly believes that whatever stories his parents told him as a kid, and doesn’t want to let go. However untrue and stupid that makes him look.
Second, US presidential elections is this year. To apologise would be admitting he was wrong. Trump would tear him apart.
What does this mean for US-PNG relations?
As the PNG prime minister has shown, American money is too good to take a firm stance and demand an apology. PNG prime minister said it may have been a slip up on Biden’s part even though Biden “slipped” up twice.
It’s very clear on social media that Papua New Guineans want an apology. The impact on majority of Papua New Guineans is that Papua New Guineans will see the US as ignorant and arrogant partner.
Meantime China sings a deal that allows PNG cocoa and coffee to be exported to China. Cocoa and coffee farming in PNG is dominated by smallholders – families and households in rural areas. Millions of people will have cash from their exports. In the same week US president calls PNG land full of cannibals, China offers market access.
It doesn’t take a rocket scientist to know which country is been seen as respectful to Papua New Guineans now.
An apology from the US Embassy in PNG is will go a long way in societal buy in to the PNG-US relationship. The embassy should advise US president to offer an apology.
It is hard to keep track of politicians. We cannot hold them accountable for their actions if we do not know what they are doing – or not doing – with respect to their duties.
We have got to keep our politicians honest by keeping an eye on them at all times!
The PNG daily newspapers, generally, do a good job in keeping our parliamentarians honest, although in recent years there has been growing concerns over biassed reporting on several occasions.
Radio still does a terrific job in terms of coverage and the quality of reporting. The NBC easily leads in keeping our people informed on what is happening in our country. The commercial FM radios are doing a good job, but their focus is on the national capital, leaving room for improvement.
EMTV could become a powerful medium of communication, but they employ lazy reporters, with terrible English, while the good ones (John Eggins and Scott Waide have moved on).
Social media, with all its faults and awful grammar, has the potential to hold MPs accountable, though we get a lot of misinformation at the moment. The level of literacy will improve the standard of reporting and debate on key issues affecting our country.
Sir Anthony Siaguru used to provide some great commentaries on the state of affairs in PNG. I enjoyed reading Dr Tony Deklin’s commentaries, but he has stopped writing for the general public. I love reading Dr Andrew Moutu’s elegant articles on a wide range of topics, but his writing is not for public consumption. He writes for a cultured audience.
John Endomonga and Samson Komati provide useful political commentaries on everything political. Their commentaries, although biased, are necessary. David Lepi’s commentaries are biased toward Peter O’Neill – but he writes beautifully.
Micheal Kabuni and Duncan Gabi do better than most. They will, no doubt, take the mantle of responsible reporting in years to come. I hope politicians do not buy them off. Patrick Kaiku and Teddy Winn will provide leadership in political analysis at UPNG soon. Francis Wagiriai and Mike Kabuni will join them there. That will provide the basis for PNG political scholarship and commentaries on national affairs.
I would love to read more from some great thinkers, including Roland Katak, Joseph Sukwianomb, Professor John Nonggorr, Dr Thomas Webster, Gabriel Pepson, Peter Pena, Peter Komon, Paul Mawa, Paraka Maua Pena, Thomas Laka, Dr Lawrence Sause, Dr Steven Winduo, Dr Elizabeth Kopel, Dr Fiona Hukula, Dr Orovu Sepoe, Dr Hengene Payani, Dr Linus Digim’Rina, and Professor Frank Griffin, and my countrymen Frank Senge Kolma and Nikints Tiptip.
We live in a country with high levels of illiteracy at all levels. It is up to people with knowledge of government to comment on public affairs.
When good men – and great women – stand by and do nothing, evil triumphs. So, it is absolutely necessary that learned men and women must stand up for the rights of the downtrodden.
Academia Nomad 