2012 National Budget Commentary
The 2012 Budget is largely sound, focused as they state upon 'sharing the wealth and empowering our people'. The expenditure focus is inappropriate, focused upon the priorities of education, infrastructure and health (plus some boost to police/law and order); the reduction tax, notably for the lower incomes (esp raising the threshold to K10000) is appropriate, especially considering the considering rise in living costs over recent years.
The lowering of import duties, largely from 25-20% and 15-12/5% including of basic foods, like flour/wheat imports, will also ease the inflation rate, along with the appreciating kina. Against that is that some taxation contribution is valuable, including to encourage a sense of ownership of the State by the whole community, and seeking accountability. Also, the downside of the stronger kina is lower local commodity prices, including for PNG farmers, and lower export earnings.
The inflation rate remains high and a worry. Low official debt levels to GDP are positive, except that major contingent liabilities associated with LNG equity acquisition raise risk as well as likely debt levels. Some of the commodity prices are perhaps somewhat optimistic; oil is probably realistic, even conservative, but the market is always volatile. Copper price forecasts (curerntly at US$ 7,800/tonne) seem a bit optimistic at $8,819, and likewise gold is surprising being priced well about current price (of $1,709/oz).
Major project expenditure on road transport is overdue, but it needs to be coordinated by Transport Dept, rather than too ad-hoc. In the end more funding is required for recurrent maintenance, rather than on a project by project basis, although this is the purpose of the NFA, and it's noted the proposed National Infrastructure Authority (but with some caution over proliferating institutions, overlapping and not replacing).
Implementation capacity is weak, espcailly with engineers having been snapped up by PNGLNG and elsewhere, so Govt would do well to heed BPNG's advice against competing with LNG on limited construction capacity, and leaving much of that till after LNG construction concludes, and there may be surplus capacity. The comment is noted that provinces and church partnerships can help sustain rural airstrips, but they do need adequate support for priorities amongst the 3-6000 rural airstrips, to provide basic access, including for emergencies, in this land of very high maternal and child mortality , especially.
Free/subsidised education will result in considerable increases in some school applications and admissions. Many schools and classes are already full, and teachers over-stressed already with 80 students in their classes. There is an ongoing programme for upgrading schools, extra teachers, but much of this was underway before the 'free primary/lower secondary school commitment.
Appropriate coordination is needed, as Minister Polye says, there's no point in just having extra numbers, without quality, of parents and students will find it pointless anyway. Significant overdue extra funding is provided for tertiary colleges, but there seems still to be inadequate funding for upgrading and extending technical and vocational colleges, for the evolving needs of PNG industry and services, and practical life skills, with improved facilities and professionals teachers.
Implementation is partly about management, as well as the right combination of resources. It is also about suitable oversight and accountability, and halting the massive waste reported in various inquiries and other reports. A small increased in PIP funding for the Auditor General is welcome, but the AG, Ombudsman and related bodies, including NACA, are inadequately funded for the scale of the task, including civil society watchdogs, to facilitate social auditing and accountability of funds.
Agriculture remains inadequately funded, and it's disappointing there's now only the World Bank, supporting parts of the sector, together with a useful input from NZAID. Agriculture remains the country's backbone, and whilst road access is a primary constraint, fixing up the deficient institutional support for the sector is also needed, rather than further retreating for sector support.
The National Development Bank is not in a position to all the sector's needs though credit, and the bank needs to be more closely supervised to ensure it's lending is both meeting real needs and priorities and actually being repaid. A range of practical agricultural initiative have been overlooked which is disappointing, as is the withdrawal of AusAID funding to the sector. (On the other hand the major focus of the Agriculture Dept on a massive proposed 100,000 ha rice project is somewhat absurd and imposes a major potential distortion. It seeks major protection, ie at the expense of PNG's hard pressed consumers, for rice production to fullfill the entire PNG domestic market and for major exports.
Why should PNG subsidise rice exports? DAL says it will be competitive, but if that's the case it should entail private capacity investing on a modest pilot area (of a few hundred, possibly even thousnad ha) and proving the viability, before pursuing a vast SABL adn trying to blindfold the landowners into unrealistic benefits and at the invaluable expense of the consumers and the State; for the benefit of a few wealthy PNG store owners and their Jakarta-based relative, with a major real estate company).
Likewise, caution should be give to the other proposed State-funded mega schemes, notably Marine Industrial Zone (which in any case should be located in suitable industrial site and be cautious of a fragile lagoon system) and the Kone Petroleum park, which tended to be pushed by a few commercial interests, consultants and their colleagues in certain Departments.
But largely, this Budget is as Minister Polye specified, a people's Budget, addressing real needs, and could contribute to them well if implemented from January not March or April next year, and if subject to close oversight, including the continued DSIP funding. The latter, which has been widely misused to date in many Districts around the country, invariably gained a further installment of funding, in a period when sitting members take advantage of their comparative access to resources in the Elections; but the DSIP is particularly in need of sound independent monitoring and social auditing.
INA
The lowering of import duties, largely from 25-20% and 15-12/5% including of basic foods, like flour/wheat imports, will also ease the inflation rate, along with the appreciating kina. Against that is that some taxation contribution is valuable, including to encourage a sense of ownership of the State by the whole community, and seeking accountability. Also, the downside of the stronger kina is lower local commodity prices, including for PNG farmers, and lower export earnings.
The inflation rate remains high and a worry. Low official debt levels to GDP are positive, except that major contingent liabilities associated with LNG equity acquisition raise risk as well as likely debt levels. Some of the commodity prices are perhaps somewhat optimistic; oil is probably realistic, even conservative, but the market is always volatile. Copper price forecasts (curerntly at US$ 7,800/tonne) seem a bit optimistic at $8,819, and likewise gold is surprising being priced well about current price (of $1,709/oz).
Major project expenditure on road transport is overdue, but it needs to be coordinated by Transport Dept, rather than too ad-hoc. In the end more funding is required for recurrent maintenance, rather than on a project by project basis, although this is the purpose of the NFA, and it's noted the proposed National Infrastructure Authority (but with some caution over proliferating institutions, overlapping and not replacing).
Implementation capacity is weak, espcailly with engineers having been snapped up by PNGLNG and elsewhere, so Govt would do well to heed BPNG's advice against competing with LNG on limited construction capacity, and leaving much of that till after LNG construction concludes, and there may be surplus capacity. The comment is noted that provinces and church partnerships can help sustain rural airstrips, but they do need adequate support for priorities amongst the 3-6000 rural airstrips, to provide basic access, including for emergencies, in this land of very high maternal and child mortality , especially.
Free/subsidised education will result in considerable increases in some school applications and admissions. Many schools and classes are already full, and teachers over-stressed already with 80 students in their classes. There is an ongoing programme for upgrading schools, extra teachers, but much of this was underway before the 'free primary/lower secondary school commitment.
Appropriate coordination is needed, as Minister Polye says, there's no point in just having extra numbers, without quality, of parents and students will find it pointless anyway. Significant overdue extra funding is provided for tertiary colleges, but there seems still to be inadequate funding for upgrading and extending technical and vocational colleges, for the evolving needs of PNG industry and services, and practical life skills, with improved facilities and professionals teachers.
Implementation is partly about management, as well as the right combination of resources. It is also about suitable oversight and accountability, and halting the massive waste reported in various inquiries and other reports. A small increased in PIP funding for the Auditor General is welcome, but the AG, Ombudsman and related bodies, including NACA, are inadequately funded for the scale of the task, including civil society watchdogs, to facilitate social auditing and accountability of funds.
Agriculture remains inadequately funded, and it's disappointing there's now only the World Bank, supporting parts of the sector, together with a useful input from NZAID. Agriculture remains the country's backbone, and whilst road access is a primary constraint, fixing up the deficient institutional support for the sector is also needed, rather than further retreating for sector support.
The National Development Bank is not in a position to all the sector's needs though credit, and the bank needs to be more closely supervised to ensure it's lending is both meeting real needs and priorities and actually being repaid. A range of practical agricultural initiative have been overlooked which is disappointing, as is the withdrawal of AusAID funding to the sector. (On the other hand the major focus of the Agriculture Dept on a massive proposed 100,000 ha rice project is somewhat absurd and imposes a major potential distortion. It seeks major protection, ie at the expense of PNG's hard pressed consumers, for rice production to fullfill the entire PNG domestic market and for major exports.
Why should PNG subsidise rice exports? DAL says it will be competitive, but if that's the case it should entail private capacity investing on a modest pilot area (of a few hundred, possibly even thousnad ha) and proving the viability, before pursuing a vast SABL adn trying to blindfold the landowners into unrealistic benefits and at the invaluable expense of the consumers and the State; for the benefit of a few wealthy PNG store owners and their Jakarta-based relative, with a major real estate company).
Likewise, caution should be give to the other proposed State-funded mega schemes, notably Marine Industrial Zone (which in any case should be located in suitable industrial site and be cautious of a fragile lagoon system) and the Kone Petroleum park, which tended to be pushed by a few commercial interests, consultants and their colleagues in certain Departments.
But largely, this Budget is as Minister Polye specified, a people's Budget, addressing real needs, and could contribute to them well if implemented from January not March or April next year, and if subject to close oversight, including the continued DSIP funding. The latter, which has been widely misused to date in many Districts around the country, invariably gained a further installment of funding, in a period when sitting members take advantage of their comparative access to resources in the Elections; but the DSIP is particularly in need of sound independent monitoring and social auditing.
INA
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