Speech at Independent Team Dinner by Rt Hon Sir Mekere Morauta, KCMG
Tonight’s gathering is not to raise millions of Kina, like other parties have done. Nor to entertain you with stars flown from Ireland or other continents. The tables and seats are priced at a level that working people and small businesses might afford.
My intention tonight is to set an agenda for a national conversation. The time for whispering, for speculating, for telling stories, and for fear, is over. I ask every concerned Papua New Guinean to think and openly talk about our future.
The character of Papua New Guinea has changed profoundly in the last 5 years. The Papua New Guinea that Michael Somare, Julius Chan, Paias Wingti, Rabbie Namaliu and I helped shape has changed, and changed for the worse. Papua New Guineans do not like what they are witnessing and living with daily; they are uncertain about the future.
WE SEE THAT:
· Corruption and abuse have become systemic and systematic. Institutions, systems and processes are being tilted to facilitate corrupt activities.
Projects are awarded without public tender or rigged to favoured contractors to channel money to individuals. Corruption is planned, not accidental.
· Appalling and incompetent management of public finances
· A mountain of public debt - K22 billion at the end of last year, and this figure excludes an estimated K14 billion of debt hidden in state enterprises and in massive export credits from China. The UBS loan for example, has been rolled over at least twice, as Government could not meet the scheduled repayments. With capitalization of the interest due, the total loan must now be over $1.5 billion. When will we be able to repay this?
· Last year alone, 2016, disclosed public debt increased by 22%, by K4 billion.
The result is that we have mortgaged future income to debt repayment, over K1.5 billion in interest payments a year. The interest on the hidden SOE debt could be an additional K1 billion a year. And should domestic interest rates rise, the amount of interest payable will also rise.
Debt service is the biggest single sectoral allocation in the budget, reducing the amount available for other sectors.
· Recession in the non-mining sector, with job losses and businesses cutting expenditure
The collapse in business profits is shown by the large - 12% - reduction in corporate tax receipts last year.
· Government not paying businesses for services received, which in turn leaves companies struggling to pay their own bills and staff.
· The value of the kina administratively pegged. If it were allowed to float freely, it is likely the kina would depreciate by more than 20%, resulting in increases in domestic prices and inflation.
AND WE SEE:
· Businesses queuing up to obtain foreign currencies to pay offshore bills.
Why, we ask, when the Prime Minister and the Governor of the Central Bank keep trumpeting that foreign reserve levels are high and the Government has no cash flow problem.
Every three days a tanker departs from Papa/Lealea terminal steaming away with $US53 million worth of gas. That’s US$160 million every nine days; US$6.5 billion – or K20 billion – a year.
Where is the money? Why has the Government not spent some of the revenue to develop the non-mining sector – agriculture, tourism, fisheries, etc. Why have landowners not been paid their royalties, development levies and other agreed legal entitlements?
Isn’t it paradoxical that we have one of the world’s most profitable LNG projects, yet we have a severe shortage of foreign currencies, the non-mining sector is in recession and the Government has cash-flow problems.
Are mining and petroleum companies paying taxes, including GST? Are the LNG companies bringing all or part of the US$6.5 billion into the country?
It is clear that:
· The Government does not understand that more borrowing and turning the Central Bank into the Government Printer of Kina will only deepen our problems. Printing Kina or borrowing domestically without foreign currency backing will bankrupt the country and threaten convertibility of Kina.
· Hospitals and health centres short of drugs, consumables and equipment
· Diplomats, teachers, doctors, health workers, policemen and soldiers not being paid properly or on time
· Universities – UPNG, Unitech, Goroka, Vudal – are run down and under-funded, yet the Government is building a new one - in Ialibu – using contractors “with connections”
· Schools struggling as they have not been paid full school fee subsidies.
· Breakdown of the machinery and processes of government
· Destruction and politicisation of state institutions
· Dictatorship-type rule with gross interference in ministerial powers and responsibilities
· Bypassing of ministers with some important departmental heads, such as Treasury, reporting directly to the Prime Minister
· Abuse of the DSIP to chain MPs to the Prime Minister’s leg, by not releasing DSIP funds to MPs out of favour. DSIP is not a political tool; it is not a private fund to supply political oxygen to the Prime Minister. DSIP is to be used for district development.
· Gross interference in the police and other law and justice agencies
· Crushing of dissent and violent treatment of protestors.
The problems we are facing now are similar to 1999, but the scale, depth and interconnection of the current problems make fixing them very complex and politically unpopular. Many will require some very bitter medicine. But the longer the problems are ignored, the worse they will get. We must set a new course now, otherwise the inertia will be too strong.
Where do we start?
The first step is to change the Prime Minister and his government.
Let me be clear. I am not anti-PNC. I am not anti-Peter O’Neill as a private individual. I am anti-O’Neill as the Prime Minister, because all of our problems bear his fingerprints as Prime Minister.
His government is a government that has no heart for people and no interest in the future. The Prime Minister is fabricating stories, misleading people and, it would seem, actually believing his own fabricated defences.
The PM is acting and spewing like a flying fox – telling us that everything is fine, when obviously everything is not fine at all. Spending billions in Port Moresby, and saying how much development has occurred in the country. What about Kerema? What about anywhere else? What about the Highlands Highway? What about mothers dying in childbirth? What about no medicine in health centres? What about books in schools? What about the Government paying its bills? What about the Government paying its share of public servants’ superannuation, so the waiting retirees can be paid?
The PM boasts about the country’s high GDP growth. Does he not know that Papua New Guineans do not eat GDP? It is what is done with GDP that matters. Converting GDP into goods and services for people would be a measure of achievement, and that is precisely what he has failed to do.
The Government appears to be an octopus, led by people whose personal commercial interests are more important to them than the national interest and their public duty. An octopus with many tentacles, invading every crevice, every nook and cranny where there is the smell of money.
The tentacles have already grabbed significant commercial stakes – in construction, security services, property development, real estate, gaming, hospitality, mining and exploration, petroleum, aviation, insurance, financial services, IT and communications. What is left for anyone else? The tentacles of the octopus have even crossed international waters, to hide and deposit the spoils.
Put simply, the octopus has to be destroyed. It is pointless to just cut the tentacles,
because new tentacles will grow.
A change of government will allow the engine of government to restart and through reforms, lay the foundation for future growth and prosperity.
Until we know the full extent of the budget and debt situation; until we know the extent of corrosion of the processes and structures of government; it is difficult to specify corrective measures in detail.
But to start the conversation and help set the agenda, I outline some obvious measures.
1. Weed out corruption and strengthen oversight institutions
Taking tough action on corruption will be an essential element of returning the country to good health. Strengthening the oversight institutions, improving governance, respecting and enforcing the laws are fundamental first steps.
Immediately, a new Government should:
§ Reinstate Task Force Sweep and resource it to investigate corruption throughout the public sector, including known cases, without any interference
§ Widen the Proceeds of Crime legislation to allow prosecution of all parties involved – givers and takers
§ Strengthen and adequately fund the Police so that the Fraud and Anti-Corruption Directorate can carry out its investigations properly, without political interference
§ Adequately fund the Auditor General, the Ombudsman Commission, the Office of the Public Prosecutor and the Police Prosecutor
§ Increase funding to allow the Judiciary to appoint special judges to hear corruption cases expeditiously
§ Table the reports and recommendations of Commissions of Inquiry, including into SABLs and the Finance Department, and act on them.
2. Spend the money we have differently
Reconstruction begins by reforming the budget, so that it becomes the major tool for economic and financial management, fiscal discipline and priority-setting. Right now, it is just one man’s big pocket money.
In spending the money differently and more effectively, a supplementary budget reallocating resources to achieve four main aims will be required:
1. protect core services in health, education and law and order;
2. maintain social and economic infrastructure;
3. stimulate the non-mining sector by providing incentives, services and support, especially for small and medium business and agriculture; and
4. clear Government arrears and pay contractors and suppliers in full and on time.
Achieving these aims will be difficult, given the endemic mismanagement of the last five years. Restoring order will require successive sound budgets, guided by a Public Expenditure Review.
Better use needs to be made of aid money, especially Australian and Chinese aid. Instead of Australia spending hundreds of millions of kina on security for leaders’ meetings, contractors and so-called governance programs, the focus needs to be on PNG development priorities such as health services, education and direct support to oversight institutions. All aid should be integrated into the budget.
3. New Revenue and Savings
Given the recession in the non-mining sector, the outlook for increased tax revenue is bleak. The Tax Office needs strengthening so that everyone who is liable to pay tax does pay tax. The Tax Office should also hire specialists with skills to monitor big companies to minimise tax avoidance through transfer pricing and other means.
Tax concessions that have been granted, including exemption of GST and tax holidays, should be reviewed.
Another immediate task for a new Government is to bring out of the cupboard for public airing the true state of public finances: the real level of arrears, the total public debt, and the amount of revenue forgone through tax credits and tax concessions.
The tax credit scheme is being used by the Prime Minister to fund his pet projects,
many outside the Budget framework; a complete misuse and abuse of the scheme.
Tax credits are public money, to be used to fund priorities in the Budget and execution of agreements with landowners and provincial authorities.
A new Government should act to bring national debt back under control. No more foreign or domestic commercial borrowings. The terms of existing loans should be renegotiated to achieve longer repayment periods and lower interest rates.
Some might be refinanced through the use of concessional finance.
Separately, the Government should immediately seek balance of payments support from the International Monetary Fund to meet the backlog of foreign currency orders and provide sufficient stock for the private sector to start operating normally.
We all know that few state-owned enterprises are profitable. The current practice of forcing SOEs to pay “dividends in advance”, not based on declared profits, is illegal.
There is clearly a need - again - to increase the oversight and strengthen the management of these state-owned businesses, where corruption and political interference now hold sway.
Assets and investments that are profitable can be restructured to help pay down the mountain of public debt run up by the Prime Minister.
Friendly Foreign Support
Instead of mortgaging future income flows to foreign brokers and bankers, the Government should seek funding support from friendly nations like Australia, New Zealand, China, Japan and from multilateral development organisations such as the World Bank and Asian Development Bank.
Such assistance will only come if donors are convinced that the Government’s measures of reconstruction and reform are appropriate. This was the foundation of the successful recovery I led as Prime Minister from 1999 to 2002, when a group I established called the Friends of Papua New Guinea played an integral role in repairing the damage inflicted by the previous PNC-led government.
We are a country rich in natural resources. We all know that. Why is it that basic services are so poor? Why is it that the welfare and income levels of the majority of people are so low? This is the paradox we face.
Rich in resources; poor in services.
We must know by now from our experience that money alone will not solve our problems. In fact having a lot of money can be a curse, if that money is in the hands of the wrong leaders.
We do have money, yet we have money problems. So what is the missing ingredient? What should be combined with money to solve the paradox?
That is the question that must be answered.
Need for a New Government
My family and many close friends think I am long-long to contemplate re-entering the chaotic world of PNG politics.
I am re-entering because like many Papua New Guineans I can no longer accept what is going on. I want to play an active part in removing this wayward, corrupt Government and in helping re-build a Papua New Guinea that is fair; a country where everyone has an opportunity for a decent life; a country where people can freely exercise their democratic rights; a country that will provide its children with a sound future.
I stand to be counted. I want to help form a good, clean and effective Government with moral leadership, a government that is dedicated to the nation, not driven by personal interests.
I am ready to help any Prime Minister, bar one, to achieve that.
We all must begin discussing policy options, and join with like-minded individuals and organizations to press for the reform that is so sorely needed.
We must exercise our voting power at this election to elect good, capable, honest men and women to Parliament, men and women who will not be induced by money or the offer of positions by the very leaders who have brought our country to its knees.
Our future is at stake. As in 1999, we have another Date with Destiny.