Letter from the Land of Plunder

FOR the past few days I have been working in Papua New Guinea, a country where I lived for more than a decade, in an earlier era. That past was another country. They did things differently there, as many Papua New Guinean friends from that time have kept reminding me this week.

They did some things differently, but not everything of course. So much has changed, so much not.
The constants include positives such as the sunny nature and good humour of Papua New Guineans.

But that also includes their frustration at the failure of government services, at the astonishing gap between the cost of housing and their wages even many managers and skilled workers have no choice but to live in teeming squatter settlements and at the tales of vast sums of money that seem to flow past, tantalisingly just out of reach.

The dominant focus is on the distribution rather than the creation of wealth.
The creation is widely assumed to come from the resource game. As the quantums there have stepped up, so have the stakes.


Thus the intensity, and to an extent the growing bitterness, of the "great game" of politics there, with each side those sides themselves ever-shifting accusing the other of corruption, and in the past couple of weeks ratcheting up the drama through the creation of rival governments.
No one in politics, at this stage, can bear the thought -- can contemplate even a single pre-Christmas sleep in the contemplation -- that they may not be in government, with all the privileges this can bring, as the 2012 election approaches.

Only a single sitting MP is certain to retire next year, Queensland-born Carol Kidu, who showed considerable courage on Monday in turning out to support a bill for 22 dedicated women's seats, as the only member of the opposition.

The other 108 members all appear determined to contend for power at the poll for the next five-year parliament, when government revenues are set to soar -- although Michael Somare, still to many "the chief", may join Kidu, for health reasons.

When parliament began sitting this week it was symptomatic that the first two questions raised on the floor were about resource developments. Peter Iwei, the member for Telefomin in the northwest, asked when the Frieda River project would get under way, when Xstrata would be given its operating licence -- frustrated at recent delays.

Powes Parkop, the go-ahead governor of Port Moresby, admitted there were no projects within his constituency but asked -- on behalf of some of the armies of landowners who today are camped for long periods in the capital seeking money from government or resource firms -- a question about royalties from the $16 billion ExxonMobil-led liquefield natural gas project.

On Tuesday parliament passed, by the often elusive two-thirds majority required for a constitutional measure, legislation establishing a sovereign wealth fund designed to quarantine some of the windfall earnings from gas.

On balance, and judging from hindsight, with politicians tending to plunder such projects, that is a positive move. But it doesn't guarantee the income that is still available will be effectively spent.
And there is a case that the country needs to resource health, education and infrastructure, not at some deferred date.

Further, the royalties and other benefits that are intended for landowners often evaporate mysteriously, sometimes funnelled through bodies that lack any legal status, so the money trail proves untraceable. A succession of resource projects has been hailed as "the engine of growth". And mostly the projects have been admirably and conscientiously run. But while the engine has purred, the car the broader PNG economy has gone nowhere. This year, growth is heading for 9 per cent, which may even overtake China's. It has not led, however, to a significant increase in jobs.

The links are simply inadequate. For example, a recent frank report by Ross Garnaut and former PNG prime minister Rabbie Namaliu revealed the shocking state of PNG's public universities, where spending per student is below one-tenth of what it was at independence 36 years ago.
Mechanics across the country were trained at Bougainville copper mine, and today the LNG project has refurbished Idubada technical college outside Port Moresby impressively, as training is intensified for its needs.
But a big skills gap remains. While the capital overflows with unemployed young Papua New Guineans, mainland Chinese workers can be seen doing routine labouring in building sites often constructing luxury flats whose rents are affordable only by resource corporations that can offset them against tax. Meanwhile, much of the country's retail sector the traditional stepping-stone for PNG entrepreneurs  has been delocalised in recent years, with a growing share owned by Asian logging giants recycling their earnings.

The most impressive new building in Port Moresby in recent years is Vision City, a vast mall owned by Malaysian logger Rimbunan Hijau.

A new study by think tank Oxford Policy Management ranks PNG as one of the 12 countries most at risk to the "resources curse". It is dangerously dependent on such exports; in PNG's case the source of 60 per cent of the total.

The study finds "a significant negative correlation" between such dependency and the failure of institutional and broader economic development, with "limited industrial diversification".
Whoever takes the wheel in PNG's parliament after next year's election faces the formidable challenge to reshape the economy while continuing to welcome resource investment.
That will take not only the political acumen that clearly abounds among today's politicians but also the wisdom of Solomon and the honesty of Abe Lincoln.

ROWAN CALLICK
This article was first published on the Australian on the 22nd of December 2011