PNG GOVERNMENT 100 DAYS ECONOMIC RECOVERY PLAN

by IVAN KEAS CPA

Introduction

PNG is a growing economy in market and business and it’s not limited in its investment capacity. It is open and wide that can efficiently allocate and distribute investment resource within its system. The West Minister Government and the Indigenous values have resembled this attributable development trait that complements the structure to adapt well with relative ease and it’s been appreciated as an integrated enabling cross-cutting culture that posses commercial and economic respect.
The values have held the tenets of our democracy and loyalty to our heritage that affirms Human to be a distinguishable creature. We hold this truth as it stood the test of time in our Constitution.
Papua New Guineas do not have any problem with its People, System, and Economy. She is young, cute, virgin, wealthy, rich, energetic, adventurous and attractive because of its beauty and its people.
Notably, PNG Economy is an interdependent economy and majorly generates its income on exporting primary products and other invisible exports. Interestingly the Primary Industries are seen as PNG Strategic Long-Term Asset that generates long-term revenue whereas Tourism and culture are seen to be a short-term asset that generates cash for the economy’s cash flow. Tourism is convinced to be current assets that have the revenue generating capacity and can contribute fast to the liquidity management of PNG.It has a lot of investment streams (tangible- intangible) and broader ranges of commercial prospects.

Moreover, PNG long-term assets have been strategically allocated on revenue generating capacity. Kumul Consolidated Holdings major investment interests have been centered mostly on Mining and Petroleum only.

However, nothing in Tourism business, Hotel business, Inn business, Reservation  services, Tour  services, Movies and acting business and sites, Landscaping and visits services, Botanics business, Parks services, Bungalow and resting-outing business, Surfing and diving business, Fishing and catching sports business ,Musical studio and recording (Traditional relics) business, Boutique local banquet, Tranquilities centers, Sea breeze cafe, Resturant etc.

These are our cultural inheritance goodwill. Billions of amounts of cash are trapped in them that require skills and effort to realize with an effective partnership and workable investment policies.
Thus, Timber, Agriculture, Livestock, Fishery, Quarry, Rubber, Copra, Cocoa, Spices and Nuts, Fresh Water and Bio-diversity (Aquatic & Terrestrial) for medical inventions and pharmaceutical products and service are all not been strategically allocated and invested.

Practically Papua New Gunea cash cows weren't effectively and efficiently regulated, controlled, preserved, cultivated and managed. It is of paramount to emphasis a lot; as such is our economic competitive advantage and our indigenous skills and lifestyle is in- build to it and as well our long-term productivity growth depends majorly on them.

Arguably, the cost involved in this investment will be cheap and least because Land and Labour will be easily available, thus, the government assistance shall invest only in the capital, appropriate financial arrangement and economic stimulating incentives, policies and infrastructure - technology.
The government should allocate a Capital Investment Package to introduce these Indigenous markets into business. Similarly to the way SOEs are controlled, regulated and managed.  Hence, for this, the structure shall be with Land owners, Government and other business partners with the same interest.

For example, Import Substitutes: With Land and Labour owned by the people of Papua New Guinea. Agriculture business, Cash crops plantations, Textile industries, Livestock farming, Fruits and vegetable market, Logging and timber business and Fishery and marine business can be tapped. Down stream processing can be a lucrative investment force to contribute to the micro-macro economic activities. Local industries constructions and investment will generate cash producing opportunities for increasing domestic consumption, competitive price, quality service and products, long-term employment benefits, income and wealth creation, savings, improve the standard of living and as well as continues overseas export.

Small medium enterprise and informal sector are unrealistic and uncompetitive because it doesn’t have the sustainable economic capacity. It only feeds on few establish industry and most of its income is generating from formal sector individual take-home spending. The government should not focus heavily on it because it doesn’t have substance and determining values. It is the residual from retail business and main stream activities as businesses are investing in the scale of economies.

Political Position
The current political predicament is caused by Government Passion called Policy Appetite. Primarily the government total spending was dictated by its Policies Interest. The Government attitude has been so passionate about it policies ingredients and has lost compassion to the real development issues. Real economic  development canon and fundamentals, administrative governance and procedures, public general orders, rules, conventions and bureaucratic machinery were been expedient and weren’t  governed and valued with respect; and as their appetite increases they become obsessed, speculative and extravagant fueled by their rhetoric  Policy Popularistic Campaign;  as a result; discipline, control, and accountability towards quality management  decision-making in efficient use  of economic and financial resources allocation and distribution were patronized and leads to over consumption without economic utilities. Whilst the public concern is raised since this huge amount of resource are earned through heavy borrowing and from expensive loan arrangement.

Economic Position
The current economic situation is caused by Increased Government Debt Burden. Government short-term debt and long-term debt exceeded beyond its Income Growth.  Interest accumulated debt rate increases over Income growth rate; positioning the government into Credit Unworthy;  as it is no longer having the ability to repay its loan or getting an additional loan due to its collaterals are undervalued.  PNG economy is at both Inflationary and Deflationary situation with uncompetitive Production Growth.

Importantly government spending stimulates the economy and the spending consists of credits and cash.  When the government spends since it raises its budget through taxes and borrowing, it increases public income that increases public borrowing and increases productivity growth (GDP). Thus, in an economy without credits, the only way to increase spending is to produce more but in an economy, with credit, you can also increase your spending with borrowing. The point is, an economy with credit has more spending and allows income to rise fast than productivity over the short run. For example, Total amount of credit in the USA is 50 trillion dollars and the total amount of cash is 3 trillion dollars, in reality, most of what people call money is actually credit.

Hence, when credit is available we have economic expansion and when credit is unavailable we have an economic recession.  For instance, when the amount of spending and income grows faster than the production of goods and services; prices rise and when prices rise we encounter Inflation. As central bank functions are to influence Interest rate and Control money.  It raises high-interest rate; this leads to less borrowing, high debt repayment and reduces spending. A person spending is another person income, income fall and when people spend less, price slows down and we face deflation, economic activities decreases and we have an economic recession.

Moreover, as a business, people, government, and banks have the attitude to invest continually it stimulates production growth (GDP) with more borrowing, income rises, asset value growth and stock market rise, people feel rich and wealthy. However, as the debt increases and repayment growing faster than income, thus, forcing the government  to stop spending, reduce borrowing; as a result income fall, people become less credit worthy and it all operates in a predictable circle.
Precaution is when Debt Burden is high it causes economy into Deleveraging. The government cut public spending,  public income fall,  credit disappear,  asset price drop,  financial institution get the squeeze,  stock market crash,  poverty, and  unemployment increases,  borrowers start selling assets, the value of collaterals drops, the economy less credit worthy and people feel poor.
This occurs when credits disappear, less income, less wealth, less credit and less borrowing.  Interest rate cannot longer be controlled since it’s at Zero stimulation end. During Deflationary lowering interest rate can raise borrowing increase interest rates for Inflationary control economy. These are instruments that stimulate economy depending on each situation.

Economic Recovery Plan
We have carefully valued the importance of credit as it has the ability to efficiently allocate resource and provide economic growth through stimulating and resuscitate packages. As we know the 3 important economic swings are Short-term debt cycle, Long-term debt cycle, and Production Growth.
Now with the current Economic position that Papua New Guinea is encountering and obviously the government has undertaken some of its economic measure to recover the economy. It has prioritized to Cut Spending, Reduce Debt, Redistribute Wealth and Printing Money.
Cutting spending: means austerity, government stop taking on new debts and start paying down old debts; Thus, when paying debt income fall, debt burden gets worse and leads to Deflation, gradually unemployment increases as business forced to cut cost.  Many of the unemployed have inadequate savings and need financial support from the government.

Reduce Debt: (reduce defaults and reconstruction) lenders lost confidence as the economy is no longer credit worthy. Borrowing stop and spending and income reduced, fewer savings and investment. Sever economic contraction as lenders feel depressed. Business and bank default under debt restructure –pay back with less interest, longer time-prolong, Lower interest rates than previously agreed, income and asset value reduce faster and debt burden continue to increase and deflation rises.  Lenders discovering much of what they thought were their wealth isn’t really theirs.
Redistribution of Wealth: Government comes up with high tax on few wealthy and riches to redistribute wealth from the Haves to the Havenots. They feel insecurity, injustice, immoral, heavy laden and reduce their consumption and investment growth due to the weak economy and falling asset prices.

They withheld their money, reducing its economic utility and investment opportunities.
Printing Money is Inflationary and it is used to buy stock and financial assets and government bonds. It increases assets prices and makes people credit worthy. However, it helps only people who own financial assets.Central bank only buys financial assets. Government buys goods and services. Government bonds are undervalued and printing money will only reduce the debt level at the same time allowing the government to run on budget deficits to increase spending in order to buy goods and services and creating employment benefits. It causes inflation as the economic capacity can not produce enough to cater for increased consumption and income. However, it is healthy if careful control is afforded to repay the debt level and increase government spending to stimulate economic growth at required manageable level.

Conclusion
Firstly Bank of Papua New Guinea and National Government must cooperate to stimulate the economy affirming highest accountability and practical standard.
Income Growth- gets the rate of income growth higher than the rate of interest accumulated debt. Debts decline relative to income to pass on real economic growth to keep Inflation constant and ensure a required spending is managed. Spending matter most and is essential in stimulating economic growth.
Don’t have debt rises faster than income; Income needs to rise faster when debt rises because debt burden will eventually crash us.
Don’t have income rise faster than productivity; because we will eventually become uncompetitive.
Do all we can to raise our productivity; because in the long run that matter most.
The government needs to resort to an effective timely action to ensure Deflationary must balance equally with Inflationary movements.
 Strategically allocate Wealth Investment Plan with entities like PNGSD, and other wealthy, Association, Groups, NGO, Church bodies and Foundations to distribute their wealth with high accountability and corporate governance to deliver economic realities and stimulate growth with their funds in partnership.
Create an overseas PNG Friends Donation Funds Entity and ask for donations and sponsor on humanitarian grounds from overseas friends to assist PNG from its economic recovery situation.
Create a Tourism Management Partnership Company that will attract investors in partnership for Tourism, Culture, Movies and Acting Investment.
Create an Investment Bank to provide capital for Industries construction in order to increase Productivity Growth according to our Competitive Advantage.

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