Saturday, October 25, 2014



When wanted criminals such the late William Kapris are set after by the law, people are so quick to jump into their conclusions, wanting nothing more than the death verdict even without being tried and found guilty by a competent court of law.

It is so easy for a criminal to be chased by the law than a politician who is offcourse elected by the people unlike a criminal who decide his own faith to steal.

What we have come to terms with over the last few years since Peter O’Neill become the only PM in the history of this great country to topple an elected government in a coup like leadership grabbing has attracted so much attention that he has become the focal point of public attention, like a top criminal wanted by the law.

If anything would take to neutralise and divert public attention away from being wanted by the law, no one can do better than Peter O’Neill. He has been, apart from portraying his public image, becoming a celebrity figure more than a PM.

Look around every corner on the billboards in the Capital Port Moresby, in newspapers and on TV screens. You will see how much effort Peter O’Neill has put to portray his image as the PM of the people while being wanted by the law over the Paul Paraka K71.8 million saga and other serious allegations against him.

Can this buy him enough time before the law catches up with him?

It is however, seems he has double intentions than what is being promoted. Dictators usually have their images and statues erected everywhere for people to respect and worship them but mostly importantly fear them.

Are we witnessing the making of PNG’s first ever dictator with images of Peter O’Neill flashing across on the billboards, in newspapers and on TV screens everywhere?

 Peter O’Neill is trying to portray an image that can only be matched by dictators.

But what does he want – respect, honour or fear?

From being wanted by the law for his alleged involvement in the NPF scandal, this man from Ialibu Pangia seems like a criminal always on the run, always messing up with the laws and always chase after by the laws. 

The only way for Peter O’Neill to avoid being caught by the law is to become a dictator, worship by morons and respect by cronies as long as nobody dares to stop him.

Friday, October 24, 2014

Papua New Guinea monetary policy – a very slippery slope?

By Paul Flanagan 

On 30 September, PNG’s central bank (BPNG) released their six monthly monetary policy statement. This was a mixture of good and bad news. I mentioned in a blog a couple of weeks ago that possibly the only thing more boring in economics than exchange rates was monetary aggregates. So this blog will go into these monetary aggregates but once again, there are some very important development issues tucked away among the technical details. Indeed, there are some very worrying steps being taken that auger poorly for PNG’s international credibility and ultimately its future development.

Good news

On the good news side. First, it is positive that the statement came out and continued a positive pattern of transparency of major six-monthly updates (on top of shorter monthly updates). Some countries don’t do this – and this can damage their credibility.

Second, the updates on some of the behind-the-scenes work that make for a more efficient economy are impressive. Improving payments systems lowers costs for people and businesses. They can assist in streamlining arrangements such as remittance payments to villages. And off the backbone of these improved systems there is scope to make more payments electronically – a development particularly important in PNG where geography and the security situation means that carrying and moving cash can be both dangerous and expensive.

Third, there are important messages included in the statement signalling areas of concern. This is an important role for an independent central bank. BPNG is concerned about unbudgeted expenditures and calls for a constraint on spending given the revenue shortfalls in the first six months of 2014. The lack of progress on the Sovereign Wealth Fund is another area of concern.

Fourth, the balance of payments is expected to record a deficit of only K196 million in 2014, down considerably from the estimated deficit of K1,143 million only six months ago – although the picture is less rosy for 2015 before improving in 2016.

Bad news

Now for some explicit bad news. First, inflation is expected to be around 8 per cent, a considerable jump from the 6 per cent forecast by the PNG Treasury only two months earlier. Inflation is known to especially hurt the poor. For a developing country such as PNG, this is a worrying trend but not too unusual a rate. The depreciation of the exchange rate over the last year is clearly a factor in this.

Second, foreign exchange reserves are expected to keep dropping considerably through to the end of 2015 at least. This is a little difficult to untangle as some of the text and the appendix tables are not consistent, but gross international reserves are expected to drop from K8.42 billion in 2012 to K6.49 billion in 2014 and then down to K4.95 billion in 2015 before recovering in 2016. The major issue is that PNG LNG receipts are not expected to flow through strongly in 2015, yet major repayments are expected on the commercial loan that paid for Oil Search shares.

Third, private sector credit growth is now expected to be less than inflation. As PNG moves from the LNG investment phase, it was hoped that the private businesses in other areas of the economy would help fill the gap. This is now not expected to happen.

Slippery slope?

There is even more worrying implicit bad news. First, the statement presents as a positive a new agreement that the central bank will purchase from the Treasury any government bills or inscribed stocks that aren’t picked up by the private market. BPNG will then make these bills available to small investors to purchase (through their TAP facility). In theory, this sounds great. In reality, it is disastrous. There is now an imperceptibly fine line between what the bank is doing and the bank simply printing money to fund the growing budget deficit. Small investors are not buying the new central bank bills (in the last week of September, less than K1 million were purchased). So the central bank is now providing almost unlimited financing for any deficit. Once started, this near printing of money can be a very addictive habit for any government.

This agreement by the central bank to purchase bills and stocks that the private sector doesn’t want, despite very significant increases in interest rates, is an extremely worrying step down what can be a very slippery slope. Of course a central bank can have a role in dealing with a short-term liquidity problem for a government – but this was already in place in PNG through the equivalent of a small over-draft facility.

Some may argue that this process, also known as a form of “quantitative easing” or “unconventional monetary policy” is being used in the US and Japan and possibly Europe to try and stimulate the economy after the Global Financial Crisis. However, the circumstances are very different. In the US and Europe and Japan, there are few inflationary concerns – indeed, the worry has been about deflation. In PNG, as noted above, the worry is the significant upward trend in inflation to 8 per cent. Economic history is filled with examples of how printing money can quickly over-heat an economy.

The US, Japan and Europe also have some safeguards that can help minimise the damage to macro-economic stability from this quantitative easing. A key one is a freely floating currency. This no longer appears to be the case in PNG (more on this below). Another partial safeguard is to have a strong wages policy that minimises the risk that inflation is built into constant rounds of wage increases. Recent public sector and minimum wage outcomes suggest that this is not the case in PNG either. Knowing that the measure was only a temporary one would provide some reassurance. However, no exit strategy is mapped out.

A second area of implicit concern is the discussion about the exchange rate. This is a sensitive issue for businesses in PNG. As noted in an earlier blog, the move to lift the effective exchange rate has losers (exporters, especially the rural poor) and winners (importers, including consumers). However, the inevitable rationing of foreign exchange is a significant and growing concern for all PNG businesses. Slowing the pattern of depreciation can assist with inflation by lowering the cost of imported products. The central bank was clearly very concerned about these inflationary pressures – as it should be. However, the explanation for why the change was made through lifting the exchange rate still is not convincing. The bank claims that the gap between the “interbank” rate and the buy and sell rates was a clear sign of a market failure. This might have been the case if the “interbank rate” was actually set by the market. But no market exchange rate sits at exactly 0.413 USD/PGK for over six months (from 31 October 2013 to 15 June 2014) before a very controlled move downwards of one cent in the last 4 months – at this rate, it will get back to the 3 June 2014 exchange rate in over two years’ time. There is nothing to explain why the interbank rate effectively became frozen at the end of last year. However, it clearly no longer reflects the balance between supply and demand. This is shown by what was actually occurring in the market. It is shown by the cost of having to use foreign reserves to slow down the depreciation. It is shown by the need to start rationing foreign exchange between importers. The concern in PNG is not with action to narrow the trading band. The concern is the lifting of the exchange rate to something currently around 12.5 per cent above previous market levels. One suggestion that would help restore confidence is if the central bank tendered its interventions into the market. This would help set a new interbank market reference rate, around which bands could be set.

A recent publication by PNG’s Tax Reform Committee (page 14) sets out cogently some of the key macro-economic policy changes in the 2000s that have helped PNG manage its current resource boom and avoid having to go to the IMF for a bailout (which it had to do three times in the 1990s). These changes relate to good fiscal (sustainable debt levels), monetary (an independent central bank) and exchange rate (largely reflecting market forces) policies.

The moves towards effectively printing money to finance the deficit and moving away from a market determined exchange rate are very disturbing. They put the central bank, and ultimately PNG itself, on a tempting but potentially disastrous slippery slope. A smaller deficit in 2015 will help reduce the need for deficit financing, and put less downward pressure on the exchange rate. But the central bank itself should revert to a floating exchange rate, and stop financing the government deficit. Otherwise, PNG will be increasingly exposed to risks of high inflation and exchange rate rationing, its macroeconomic credentials will be damaged, and the benefits of its long period of un-interrupted growth potentially thrown away.

Paul Flanagan is a Visiting Fellow at the Development Policy Centre. He has a long standing interest in public policy issues in Australia, PNG and more broadly. He has recently left the Australian Treasury as Chief Advisor, Foreign Investment and Trade Policy Division. Earlier in his career, he spent 17 years in AusAID in a range of policy, budget, sectoral and country program roles. - This article was first published in the DevPolicy Blog


I welcome the news of Telikom wanting to buy Nau FM and Em-TV.

It is overdue that the government take control of these operations immediately.

The reason can be found in this article that appeared in the National.

The original source of this negative information is Nau FM talkback program.

They interviewed Mr Paul Barker to get negative information about the economy to make our Prime Minister look like he is incompetent in financial matters.

He would not be the richest man in PNG if he didn’t know how to manage money properly.

Our country is in excellent financial hands with Peter O’Neill.

Nau FM is using its talkback program to spread negative information about the Prime Minister and his government.

Paul Barker is telling lies to make Peter O’Neill look bad and Nau FM is happy to broadcast the lies all over PNG which the newspapers pick up.

We know that it will not look good for the government to rid itself of Paul Barker and other negative people.

Instead the government needs to control Nau FM so that talkback radio only invites proper speakers who say the right thing.

They must speak truthfully about all the new changes our Prime Minister is bringing to PNG for our benefit.

No more negative news. Telikom must fasttrack its efforts to buy Nau FM and Em-TV.

A “Legal Corruption” In Government Ministries: The Fancy Hotel Workshop Scam

Moreby’s fanciest hotels and even the scattered fancy hotels located in other PNG towns and cities love the new legal corruption that now dominates the PNG government when it comes to workshops.  Chief Secretary Sir Manasupe Zurenuoc finally figured out what honest public servants saw nearly 10 years ago and were practicing without detection.   The harder it gets to steal money, the more motivated dishonest public servants are to find alternative means of experiencing the fancy life, even if only for a few days.  If it now is too hard to steal enough money to bring your girlfriend to the Crowne Plaza for a weekend of loving and high living, you need to find other ways to still experience the fancy life.  Fancy workshops have become a form of legal corruption to achieve this objective.

Here’s now this new legal corruption works.    Government workshops used to be held at modest hotels, even guest houses at the provincial level.  Many were held at simple church venues.  This meant that workshops cost relatively little money.  That is no longer true.

Nowdays government departments rush to book workshop space at the Grand Papua and Crowne Plaza.  Workshop attendees have their airport transport paid, their accommodation pay, get usually lunches and sometimes even dinners covered by the government department and on top of it all, they receive between K200 and K400 per day travel allowance.  This is completely corrupt because travel allowance was created for those in government service to be able to pay for their own food and accommodation.  It is like double dipping and double payment to get travel allowance and have hardly any travel expenses to pay for.  The result for the workshop recipients is a trip that is actually profitable to them.  Some government workshops in the big hotels now even have companies setting up booths to sell things at the workshops, knowing that the workshop attendees are flush with cash.   Since the workshop attendees get the big travel allowance just by showing up to register (they don’t actually have to attend workshop sessions), this means they have enough cash to do what they used to do:  bring their girlfriend for a few nights stay at one of Port Moresby’s finest hotels.

This is the modern-day corruption of the Department of Education  and Department of Health especially.   The politicians are as much to blame for this as anyone.  Government officers see our corrupt politicians such as Ben Micah (Grand Papua) and Anderson Agiru (Crowne Plaza) live the fancy life and they get jealous.  The politicians, Peter O’Neill included (a frequent visitor at Airways) set a terrible example for government workers.  The workers see that the politicians and Prime Minister are wasting government money and feel it’s all right for them to do the same.  

The problem is that Sir Manasupe Zurenuoc is cracking down in a non-analytical way.   He is dead wrong thinking that workshops are not important training opportunities.  If he persists with that kind of attitude, he will be solving one problem while creating another to replace it.   Our field officers in government badly need more training and education and workshops are part of that.  The problem is not workshops.  It is the corrupt way workshops are being planned and conducted.  

The solution to this legal corruption is to continue the workshops but stop the double dipping and force workshops to be held in simple facilities and lower cost venues as used to be the tradition.   If some government officers say they aren’t going to attend workshops that are held at Kefamo Catholic mission outside of Goroka or another one of those simple but very adequate workshop venues, then you know these government workers are more concerned about themselves than serving the people.  They shouldn’t even be in government.  

No more Crowne Plaza and Royal Papua Hotel workshops with the fancy buffet lunches and luxurious food and wine and cheese receptions.  NO MORE!   This is our tax money and public servants have corruptly kept this legal corruption secret until now.
Moresby’s Crowne Plaza, a favourite workshop venue for government workshops these days.  Note that this hotel makes sure in the photos it uses to attract clients overseas that any black faces in the photo are inconspicuous.  Only the white faces are out in the open.  But PNG government department personnel want a few days of wining and dining at the taxpayers expense so they don’t care whether these hotels show hidden racism or not.

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Y:\PIX pol\$               use now DUPS\GP.jpg

The Grand Papua Hotel, the most expensive in Moresby, is another favourite government workshop venue these days.  The high cost is of no concern and corruption in the government departments results in obscene budgets for health and education workshops being approved without a blink of the eye.  

Thursday, October 23, 2014


The Supreme Court this morning is hearing an urgent application filed by Prime Minister seeking interim injunction orders preventing Police from taking further action against him in relation to the Paraka-gate scandal.

The Prime Minister filed the application joining the James Marape's appeal case currently before the Supreme Court. Marape filed an appeal in the Supreme Court in July appealing the decision of the National Court Judge Kariko's ruling back in June refusing to grant a stay on the warrant of arrest against Prime Minister Peter O’Neill.

Pending the full hearing of the appeal Supreme Court granted interim injunction orders against Police arresting Marape. Prime Minister who is also facing further charges in relation to the Paraka-gate scandal is now seeking the same orders from the Supreme Court.

The matter is listed this morning before three man bench of the Supreme Court.



Prior to the District Court issuing the warrant of arrest against the Prime Minister in May 2014 Finance Minister James Marape filed proceedings in the National Court to tax (assess) the legal bills paid to Paraka Lawyers. This was an attempt by both Marape and Prime Minister to legalise the legal fees paid to Paraka Lawyers so neither would face charges for their part for issuing the payments.

When the Arrest Warrant was issued the Prime Minister rushed to Court to join those proceedings filing an application preventing police from arresting him.

However the National Court Judge Kariko refused the Prime Minister's application. The Judge said police and Prime Ministers were not a part of the substantive proceedings which is to determine the legality of the legal bills paid to Paul Paraka Lawyers through taxation.

The Judge ruled that the administration and control of the police force is vested in the Commissioner of Police under the Constitution. Only in the clearest cases of abuse of police power should the court intervene in a police investigation. He said in this case there was no such evidence of abuse of power.

James Marape then filed an appeal challenging the decision in Supreme Court.

Pending the substantive appeal (full hearing of the proceedings) Marape sought and was granted interim injunction orders against police arresting him pending taxation proceedings filed on the legality of the K71.8 million bills paid to Paul Paraka Lawyers.

The Prime Minister is now seeking the same orders preventing police from arresting him on further charges relating to the Paraka Lawyers.