Prospect of mutual benefits in lively ties with PNG

AFTER a few years when Australia's closest neighbour, Papua New Guinea, seemed to have drifted far from our thoughts, in recent weeks the relationship has intensified immensely.

Prime Minister Peter O'Neill last month spent a week "down south", during which he delivered three especially stimulating and constructive speeches about the economic relationship with Australia. Before coming, he had barred economist Ross Garnaut, one of Australia's leading public intellectuals, from entering PNG.

Garnaut consequently quit the chairmanship of PNG's biggest- earning company, Ok Tedi Mining. Partly as a result, O'Neill became embroiled in a fierce debate with BHP-Billiton. And the Australian government's new Pacific Solution for asylum seekers has been thrown into jeopardy by a legal challenge from PNG's controversial opposition leader Belden Namah.

What's triggering such willing events?

They emerged as separate skirmishes. But the context has magnified what's at stake here.

For Australia has now invested more than $16 billion in PNG, about the same as in China.

PNG has become a very important sphere of operations for many of our resource companies, and for the firms that service them across a broader front, geographically and sectorally, than ever before. It is this investment flow that has chiefly propelled the PNG economy into "Pacific tiger" status. Its gross domestic product has risen by more than 6 per cent for six consecutive years now, hitting an average 8 per cent over the past three years.

So it's crucial that the flow keeps on coming on that broad front, especially as the construction of the country's first, $19bn, liquefied natural gas plant has already peaked.

This will buy the government some time to achieve what has so far eluded all its predecessors since independence in 1975 -- to find the missing link between such resource growth and the economy and population as a whole, to drive the creation of sustainable jobs and of successful small and medium-sized businesses.

Even before independence, the Australian and German eras saw colonial authorities attempt to pay their own way, chiefly through plantation revenues, but they never quite stretched far enough. The chief result instead was that the building blocks for PNG development -- roads, ports, clinics and schools -- were constantly underfunded.

It is inevitable that as PNG's economy builds rapidly through the industry in which Australia is a world-beater, as all manner of flows multiply between our countries, then this intensification of the relationship will result in clashes and disagreements as well as in better understanding and mutual alignments.

The relationship simply starts to matter more. As long as both sides become well informed about the other, and communicate honestly and often, these issues will get resolved.

One that is lurking in Canberra's in-tray is the recent statement by Sam Koim, the smart young lawyer who heads PNG's anti-corruption agency Task Force Sweep, that Australia is PNG's "Cayman Islands" and that it is turning a blind eye to corrupt money pouring down south.

At the centre remains that core mutual project, leveraging the mining investment and high-end real estate boom to transform the economy.

Garnaut, a senior Finance Department officer in PNG's early independent days, recently told Radio Australia's Jemima Garrett that this is "a huge opportunity", and that "right from the early days of independence there has been a great struggle for development going on. Development from the base that PNG had at the time of independence is very difficult.

"It was always the case that successful development would take generations. You've got to build institutions, many of them from scratch. The rules that guide a successful democracy and a successful market economy don't emerge naturally in any human communities. They were hard to build in the West. They are hard to build everywhere."

Garnaut said one dimension of the desired mutual respect "is to be able to straightforwardly and constructively put alternative views to those you are hearing from a PNG leadership, that we are not supine in our relations with PNG".

In such a mode, while applauding the O'Neill government's focus on infrastructure, he warned that its budgeting this year for the highest deficit since independence also amplified macroeconomic risk.

This relationship is in for a lively -- but potentially hugely mutually profitable -- ride.


 ROWAN CALLICK- The Australian

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