Bigger state control of assets won't help PNG grow

The program was titled Preying on Paradise. There should be a law against it -- not just the preying but setting up the notion of "natural" PNG as a place of Rousseauian perfection, from which the fall is all the more devastating.
If only, this paradigm of paradise hints, the place had been left untouched, like Eden.
Australia's closest neighbour, just a canoe ride away, does host most of the 41 species of the enchanting birds of paradise. It is a beautiful country, from its Highlands -- with Mount Wilhelm reaching 4509m -- to its 600 tropical islands. Its people are warm, friendly and talented.
But it is not and never has been paradise. In the pre-outside-contact days, there were too many tribal fights and deaths at childbirth, and life spans were too limited, to qualify. More recently, people's hopes before and through independence, of a rapidly improving standard of living, largely have been dashed.
The Four Corners program focused, quite reasonably, on corruption. Not a new story for PNG, or for anywhere. But corruption is indeed a particular scourge there, reinforcing the sense of helplessness felt by many ordinary citizens that the best they can aim for is to make ends meet.
Corruption is not going to be removed altogether, there or anywhere. But the effort needs to be made. Prime Minister Peter O'Neill is the most powerful politician to have emerged in the country since founding father Michael Somare. O'Neill put in place a young Western Highlands lawyer, Sam Koim, to run an interim anti-corruption operation until he could get through parliament an Independent Commission Against Corruption, Hong Kong style.
Like Hong Kong, PNG -- with a similar population -- has an elite who pretty well know each other, making such a task more challenging. But it has worked devastatingly well in Hong Kong and, if genuinely independent and formidably well equipped, would cut swathes through PNG's top political and bureaucratic ranks.
Many believe corruption has been the main cause of the debilitating levels of more general crime, which in itself inhibits broader-based economic growth including job creation, beyond the resources sector. Standard & Poor's sovereign ratings associate director Craig Michaels says that "because of the law and order problem, resources is the only sector that attracts foreign investment".
Ultimately, O'Neill chiefly will be assessed, as he well appreciates, not by how cleanly he governs -- though this of course does matter -- but by whether living standards at last start to rise to meet people's rightful expectations.
If he can keep driving the economy at pace, then the benefits may start to flow more broadly at last. And this will bring the added benefit that members of the PNG elite may feel that if there's enough in the pool for them, whether they have their hands on the political levers or not, they can work together, or at least, to cease their constant internecine struggles.
To date, O'Neill has done well, setting up the country for a more determined drive towards faster and broader development, hopefully one that can deliver jobs at last. That's what makes his move last week to nationalise Ok Tedi mine -- without yet naming any compensation payment -- the more puzzling.
He has engaged in the most bitter war of words with former prime minister and former central bank governor Mekere Morauta, who became -- to O'Neill's irritation, without seeking his approval -- chairman of Ok Tedi and of its 63 per cent shareholder, the Sustainable Development Program trust.
Australian National University professor Stephen Howes, who is probably Australia's leading development economist, , lists five risks resulting from the unprecedented nationalisation: to the operation of the mine under state control; to the credibility of the government, which has been planning a long-term sovereign wealth fund; to the use of Ok Tedi dividends; and to the SDP projects and its $1.5 billion long-term fund for the people of Western Province for when the mine closes.
The fifth risk Howes lists is to the reputation of the government and of O'Neill himself as a business-friendly PM.
Morauta's own reputation stems in part from his successful privatisation of PNG's biggest bank. It would be odd, and unrepresentative of O'Neill's own views and his undoubted qualities, if he were to become sidetracked into carving out a bigger role for the state, which has fouled up so much of its core responsibilities in PNG.
O'Neill's Trade Minister Richard Maru has just blocked the partial takeover of New Britain Palm Oil by Malaysian company Kulim, saying that 90 per cent of the economy is controlled by foreigners: "As a responsible government we're going to take some very drastic steps to create more opportunities for own citizens to enjoy the wealth of our nation."

That's the old story -- seeking to regain a paradise that has never existed. PNG's wealth needs to be created -- by joint efforts involving foreign capital and expertise -- before it can be shared.
This article was first published on The Australian on the 26th of September 2013

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