The Structure to Confront Corruption

By SAM KOIM*

I am thankful for the opportunity to speak at this forum today. This afternoon I do not wish to be dramatic, but would like to gently draw our attention to an issue that I believe really matters our two countries –corruption.

Corruption is a global phenomenon and we can take a whole year discussing about corruption, its causes, trends, effects and the strategies to minimise it. The scale of corruption differs from country to country. Sometimes, it’s the way the society tolerates it. For instance:-

• In one country, using one’s relatives (in PNG we call wantoks) for favours is illegal and unethical, whilst in another country, they may not have a wantok system owing to the fact that their society may not be communally structured hence they call it “network”.  
• In one country, when a simple public official is receiving a bribe to supplement his salary to meet the necessities of living is called “bribery” whilst in other countries, the economic rents their multinational conglomerates pay to top government officials for government favours are readily classified as success fees or facilitations fees.  
• In one country, giving cash or other gifts to potential voters during election as bribery, an attribute of election corruption. But one wonders whether in other countries where all those big business magnates who back political parties with millions of dollars do it for the love of their country, without any expectation in return such as a favourable policy when the party they supported gets into power.

It is not my intention justify the level of corruption in one country against another in this comparison. Rather, I am seeking to impress on you all that corruption is everywhere and sometimes, society has a way of either tolerating it or dealing with it. Corruption always has an element of growth and every time you try close in on one trend of corruption and curb it, it develops into more complicated schemes and definitions. Whilst appreciating the fact that corruption can never be eradicated as long as we have human beings around, ideal societies have sought to minimise it so that it does not stand in the way of national development nor deprive the masses of what is due to them.

Corruption is not a victimless crime. It affects us all. It can stifle our economy and rob our future if we do not resolutely confront it today. It is for that reason that we have to identify the structures to confront corruption. But before we build the appropriate structures, we must set the scene upon which those structures can be built, lest we proceed on assumptions.

Background

Just last week, we saw the launching of the first shipment of liquefied natural gas of the PNG LNG project. The PNG LNG project is projected to triple the PNG economy. The Elk/Antelope Gulf LNG and Stanley Gas projects are also coming up. We got Solwara 1 deep sea mining project being the latest to join the mining industry. All of these new projects as well as the existing ones are anticipated to propel our economy.
PNG has a population estimated to be a little over 7 million. Despite significant resource wealth from minerals, oil and gas, forestry and fishing, the vast majority of our population still lives a precarious subsistence farming existence with little or no access to the provisions of a modern state such as education, healthcare, sanitation or infrastructure such as roads. As was highlighted in this forum by many of our government speakers, the Government is putting ample resources to address those pressing needs of our people.

In terms of formal employment and business, most of our people are involved in the informal sector. A number of our Papua New Guineans have successfully expanded their borders of doing business both within and outside of PNG. A lot of opportunities are available to our Papua New Guineans in the face of globalization today than it was in the past.

I have however noted that globalization has not only marked a new phase in the development of capitalism in our country, it has accelerated the pace of social change. It has infested the desire of individuals and groups to amass wealth. What globalisation has not done, among the developing nations such as ours, is the attitude - the desire for capacity building, entrepreneurship, enterprise, productivity, critical knowledge-leadership qualities, hard work, competitiveness, introspection with regard to developing indigenous knowledge and technology. It has robbed the developing nations the traditional culture of independence in productivity, communal efforts at development, crafts and guild production, disorganized the traditional agricultural and production systems that hitherto ensured food on the table of every Papua New Guinean and has rather diverted attention of the people to importation of finished goods, service industry and established the culture of consumerism, dependence and luxury.

In certain circumstances, we have noticed a growth of opportunistic behaviour where proper principles of doing business such as declaring and sharing profits after the costs are not observed. Firms that are awarded public contracts use project funds to fund capital expansions of their businesses as soon as the funds hits their bank account, thereby not completing projects on time and demanding for more variations to contracts.
I know there are many businesses attending this forum that base their operations on strong governance principles and best practises. I am wondering, if the Australia PNG Business Council can extend this forum by taking an initiative to mentor our aspiring PNG businessmen and businesswomen to develop the right attitude and instil in them the spirit of entrepreneurship based on best practises and principles.
Looking at the Relationships between our two countries on the Corruption perspective

Whilst I acknowledge the much celebrated immigration issue concerning visa requirements has thickened the border between our two countries every time we tried to find a solution, there appears to be a very thin border between our two countries when it comes to financial transactions. Until recently, the border was so thin that you could actually throw a bag of money across to the other side.
It was reported recently that Australian firms have invested almost $20 billion in PNG, about the same as in China. Two-way trade reached $5.8bn last year, with PNG Australia's 13th biggest export buyer . Whilst acknowledging that most funds involved in the two way trade are legitimate, I wonder if all are comprised of funds derived from legitimate sources.

It was estimated by a senior Australian Federal Police officer that approximately $200 million of misappropriated PNG government funds are laundered through Australian banks each year . If that is the case, then how much of it would be unpaid/evaded taxes of income derived from Papua New Guinea or Australia for that matter? In the same context, how much of illicit capital flights to other countries, are successfully washed and are returning to our two countries as clean investments?
It is for that reason that in October 2012 I spoke bluntly about institutions in Australia turning a blind eye on illicitly obtained funds from PNG being laundered to Australia. The challenge before us now is to ensure that most, if not all, of the two-way trade and investments between our two countries is legitimate and built on clean money.

I am glad to say here that the process to do so has already begun. Australian is showing keen interest and is actively assisting us to ensure that no fraudster walks across this thin border with his illegitimately obtained bag of money. I am also seeing banks are increasing their due diligence processes and even closing bank accounts of those customers they consider as “high risk”. Contrary to the visa issue, the border between our countries in terms of the flow of illicit transactions is beginning to widen in a positive way as we begin to address it.

Building Structures to Confront Corruption

Goal 5 of the National Goals and Directive Principles as enshrined in our National Constitution calls for the use of Papua New Guinean forms of social, political and economic organization to achieve development. If the primacy of the community, dynamism of custom, and significance of collective social action remains defining features of the contemporary Melanesian social order, all we need is to use them in new ways to achieve order in the society .

Consistent with this, I would like to share the wisdom of gardening, passed on from generations to generations. As a matter of fact, it is archaeologically proven that where I come from, in Western Highlands Province, more particularly Kuk, which is a not-too-distant neighbouring village to my village, our people have farmed the lands for almost 10,000 years . So what I’m going to share with you has been lived and tested for ten centuries.

I invite you to consider PNG’s rich natural resources endowment as a garden as I take you through this time tested principles of gardening to illustrate the kind of structures needed to confront corruption in the phase of our economic boom.

1. Fencing
Prior to clearing the land, tilling and planting the seeds/crops, build an appropriate fence around the garden to safeguard against rodents and pests. The type of pest determines the type and structure of fencing. Always maintain the fence. Never allow a small break in the fence to remain unfixed at any time.
PNG now is the envy of the Pacific Island nations and many other countries outside of our region. As such, it could attract genuine as well as not-so-genuine investors into the country as a result of its natural resources endowment. We have to seek to build a fence around our economy to safeguard it against economic predators, rodents, pests, and leeches. Those predators can be from within or flyby investors from outside.
We have to build strong fence like structures that:-
• Restrict illicit capital flights such as money laundering and tax evasions like transfer pricings. The Government is currently undertaking reforms to empower the institutions that administer those restrictions.  
• Increase transparency and accountability in the public procurement. Sometime ago, I described the public procurement system as encouraging tenderprenuership and not entrepreneurship. The Government is understandably undertaking a review to improve the public procurement process. It is also hearting to know that the new scheme of legislative amendments such as the Companies Act that had just been passed would inhibit the chances of persons who use companies and businesses as fronts to conduct illicit activities.  
• There is however, still some work need to be done in banning misconducting public officials from ever entering the public service or holding public office. There is also some work need to be done in bringing certainty to the requirements of barring foreigners on the basis of them being corrupt. Similarly, foreigners who offer bribes and collude with nationals to defraud the State should be banned from ever entering the country again. I know these are very radical propositions but I believe are beneficial to our country in the context of safeguarding our garden from being infected by the infected.
Essentially, what our father’s taught us was for us not to be quick in clearing the land or planting the crops without first building a fence or if the fence lies in ruins. If we do not build a proper fence, we would compete with pests, rodents and leeches over our scarce harvest. We would not enjoy the full realization of our garden and the fruits of our hard work.

2. Drainage

Evidentially speaking, Archaeologists have found some wooden spades and evidence of drains dating back some thousand years on the radiocarbon dating reader at the Kuk archaeological site. The advice to us for drainage was that if we don’t do proper drainage and instead are more interested in the crops, we would be disappointed by the productivity it yields.

Whilst safeguarding our garden against outside intrusions by economic predators, it is equally important that the garden is not waterlogged with excessive irrigation. Engineering science has long recognized that there should be no irrigation without drainage in order to avoid water logging and other negative impacts on productivity and soils . It is therefore important to do the drainage before planting the crops.
Similarly, I liken drainage as the channels of service delivery. When so much money is poured in and irrigates the economy, there must be strong institutional capacities and channels of service delivery to translate the surplus wealth into socio economic development. When that is not done, so much money floats in the economy. As such, it can have effects such as:
• Inflationary effects, having an upward pressure on the price of goods and services. It can widen the distance between the haves and have-nots. Civil servants who have difficulty affording the rising cost of living can in turn demand bribes to supplement their salary in meeting the high costs of living. 
• It creates an Opportunistic behavior. Those who see the opportunity and have the means to do so, seize it to produce benefits for themselves or others at the expense of the majority. 
• It creates rent-seeking behavior: Quick decisions can be made without conducting proper costs benefit analysis but for some quick economic rents in lucrative public contracts.  
• It generates economic distortions in the public sector by diverting public investment away from vital services like health, education etc and into capital projects where bribes and kickbacks are more plentiful. Officials may increase the technical complexity of public sector projects to conceal such dealings, thus further distorting investment.  
• Public Officials who want to lay their hands on some of those excess funds may lower compliance with construction, environmental, or other regulations; reduce the quality of government services and infrastructure; and increase budgetary pressures on government. 
• Businesses can be tempted to maximising profits at all costs including offering bribery to government officials. Remember, a bribe recipient/demander is as bad as the bribe giver/supplier. 
• Businesses can also be used as fronts to divert public funds for private gain. Sometimes in a corrupted business climate, genuine businesses can be forced to participate in such activities.  
• Beneficiaries of this illicitly gained excess wealth then explore ways to launder the illicit 
proceeds to safe havens and stable economies to invest and build their second homes. Developed economies certainly provide that kind of stable environment. 
• Leaders who, in most cases, swim in wealth and abundance in the land, and who incidentally lack vision, knowledge, flexibility and critical capacity for leadership fall prey to corruption. They can be easily blinded by their enthusiasm to amass wealth at all costs hence make them insensitive to the plight of our people. 
• The abundance can create a careless attitude in managing public funds hence increase mismanagement and wastage. Public Project costings can be over inflated to use up the available surplus funds.
When there is no strong service delivery channel and mechanism, it undermines our aspirations for all citizens to have an equal opportunity to participate in, and benefit from, the development of our country as stipulated in Goal 2 of our National Goals and Directive Principles. What it does in turn is that it converts our democracy into a mobocracy where the mob rules for economic gains. These mobs establish powerful networks to dominate the distributive powers of the State using their potent connections.
The establishment of the Sovereign Wealth Fund is an initiative of the Government to mitigate some of these risks I have highlighted as well as the so called resource curses. The institutional capacity building programs undertaken by the Government of PNG and ably assisted by Australia are some of the steps to allay those issues as well.

3. Sustainable Farming

The traditional master gardeners told us that when we are about to plant the crops, envisage the consumers of the harvest. Space the planting so that when we harvest, there would be enough for us, our extended families, those others we trade with and not to forget the seeds for the future. They told us not to produce more than what we need because we would waste them. We were counselled not to move onto a new unfarmed land until we have fully exhausted the soil fertility of the existing garden.

I have found some resonance of our traditional farming practices in the preamble of our Constitution that calls for sustainable use of our scarce resources for us in the present and for the future generations to come. I believe the framers of our Constitution come from gardening backgrounds too because they captured it very well.

Today’s contemporary farming would be different because you got storage facilities that can preserve the produces, soil fertility enhancers that enables the continuous use of the same land and large scale farming that feeds a thousand distant strangers for money. Maybe, it is so unfortunate that the framers of our Constitution may have miscalculated the advancement of technology when they crafted this particular pinnacle of our Constitution.

Conclusion

As I come to a close of my talk, I hope you’d appreciate the illustrations and comparisons I’ve used to relate the topic of this conference to the need for building structures to confront corruption in order to reap the real rewards of our economic boom. In so doing, I have drawn only three of the techniques of gardening passed onto me by the fathers of my land. I hope you could clearly see the picture from my rather unclear presentation.

It is obvious that in the midst of plenty, anomie thrives because of people’s licentious behaviours. This implies then the need for a forthright and knowledge leadership to manage the abundant resources, human and material. A lot of wisdom can be drawn from our traditional age-old principles both written and unwritten.
Sometimes, it serves well to depart from rhetoric theoretical economic frameworks and embrace our way, the Melanesian way. In so doing, we can devise structures that are compatible to our cultures and attitudes. In seeking to build structures for confronting economic growth, I find the acumen of gardening useful.
Thank you for listening.

 *Speech at the 30th Australia PNG Business Council Forum held in Cairns

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