The Future of Foreign Aid in PNG: After 25 Years of Successes or Failures?October 31 2002 at 4:27 PM
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Response to Re: Re: Re: The future of foreign aid in PNG after 25 years of successes or failures?
Clements’ suggestion of graduating PNG out of aid dependency would require thorough analyses before any concrete recommendations could be proposed. However, based on my own experience in the foreign aid business and the insights provided by the recent review of the subject for the captioned article, let me share some thoughts here for discussion purposes. My view is that for us to graduate PNG out of aid dependency we need to among other things devise a stronger private sector strategy and plan for the country. At least that would be among the pillars for us to start with - these are lessons leant from those that have graduated out of aid dependency in the region including Korea, Singapore, Taiwan, and in recent years Malaysia and Thailand.
Decision makers in PNG should adopt policies, which enable the private sector to play a leading role in sustainable economic development. Strategic initiatives can include the following: (i) Privatize SOEs to eliminate inefficient activities, reduce government budget deficit, and help alleviate external debt burden; (ii) Enhance foreign direct investment and other forms (such as partnerships franchising) of foreign participation in domestic business activities; (iii) Institutional support (e.g., training, managerial development, capital lending) for domestic business firms and entrepreneurs; (iv) Labor law reforms to enable the growth of small firms into mid- and large-sized business operations; (v) Simplification of rules and regulations governing the establishment and operations of business firms; (vi) Tax reforms to bolster domestic savings, investment and exports; and (vii) Political reforms and economic openness, including trade liberalization.
PNG must learn from the current trends and lessons (both successes and failures) of foreign aid and its contribution to the economic development of other countries in the region. There are many emerging general lessons about appropriate development strategies, which can be adopted into our planning processes. While disagreements remain, important elements of consensus can be reached on many of the components of successful development strategies PNG can consider after 27 years of experience. Some of these include: (i) development of market institutions, including supporting legal and regulatory structures at the national and provincial levels; (ii) well-functioning provincial and national government institutions; (iii) reliance on market mechanisms; (iv) investment to achieve critical levels of social and physical infrastructure (health, education, transportation, communication, etc.); (v) maintaining a stable political and macroeconomic environment; (vi) achieving critical levels of resource mobilization; (vii) reducing or eliminating gross distortions in incentive systems; (viii) increased role of foreign trade (both exports and imports); (ix) potential role of foreign private investment (including issues of short versus long term and portfolio versus direct investment); and (x) transfer and exchange of knowledge and technology with developed and developing countries.
PNG needs to pursue the reinvigoration of its domestic business firms, promote local entrepreneurship and strengthen the private sector as growth strategies. This is an enormous task and may not over achieved overnight, but we should expect failures and learn from them. The experiences of the past 27 years, however, should lead us to be confident that we will learn and that again successes will predominate.
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