Comment & Opinion
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Alan Mitchell, Australian Financial Review, Aug 7 2002
Papua New Guinea, the principal beneficiary of Australian largesse, is on the edge of failure, despite all the aid and a rich natural resource base that includes gold, copper, oil and gas, large areas of arable land, extensive tropical forests and fisheries.
PNG is now in its third year of negative growth. According to the latest UN Human Development Report, per capita GDP peaked in 1994.
Annual per capita growth since independence in 1975 has been only about 0.5 per cent - a third of the average annual growth rate of similar underdeveloped economies.
One result, says the World Bank, is an array of poor social indicators.
Infant mortality in PNG is 61 per 1,000 live births. The average for lower middle-income countries is 38. Life expectancy at birth is 58 compared with an average for similar economies of 68.
Primary school enrolment is three-quarters the average of lower middle-income economies; secondary school enrolment is a quarter of the average.
Literacy is 52 per cent, against an average of 86 per cent, while the incidence of poverty (about 38 per cent of the population) and the inequality of income are high.
In a recent report on PNG, the World Bank offered the following insight into the foundations of the nation's system.
With 800 separate language groups, PNG's traditional societies are usually small. Status within groups is based on individuals' ability to redistribute wealth to their followers.
This "big man" politics extends naturally to the parliamentary system in which parties are based on patronage rather than ideology - and political allegiances rest on access to ministries and departments with the resources to redistribute to supporters.
The state's fiscal assets are used to build the strength of MPs, and to weaken rivals and competing social groups.
National planning is weak and poorly implemented, with decisions driven by patronage. And on it goes.
The major political reforms of the outgoing Morauta Government were an attempt to curb the excesses of the PNG parliamentary system - just as its fiscal and other economic reforms have stabilised the economy.
But patronage is so deeply embedded in PNG political culture that it takes a special kind of optimism to expect a major improvement in the quality of national planning and administration under the latest coalition, led by Sir Michael Somare.
The immediate challenge facing the Somare Government is to contain the political pressures that in the past led to unsustainable government spending.
But as Mekere Morauta recently wrote in this newspaper (and as the World Bank social indicators clearly show), that is just the first step in correcting PNG's long-term development failures.
Undoubtedly, more political reform is needed to generate parliaments and governments in which the interests of those elected roughly coincide with the national interest. Further reform of the public service, the police and the military is also necessary.
The key focus of government must be directed at the core areas of infrastructure, health, education and law and order. And the priority for spending must be the rural poor - especially in the Highlands and the north coast - who account for almost 94 per cent of those living in poverty.
Lack of access to public services, including education, health care, safe water and public transport is cited by the World Bank as an an area of "severe deprivation" for the rural poor.
At the same time, PNG must do more to reduce urban real wages and increase productivity. Urban real wages - inflated by the pay and conditions of the public sector - and poor productivity remain a major impediment to private investment.
The goals are basic, but they will be achieved only by changing the course of PNG politics.
Australia's role will be crucial for all the obvious historical reasons and, more importantly, because no-one else cares very much whether PNG fails or not.
A long time ago, it was found that Australia's aid of generous untied grants - combined with its legacy of an oversized public sector, a wage tribunal and a colonial spit-and-polish army - had not led to the desired focus on development and poverty reduction.
But the less generous regime of more project-specific aid of recent years has also failed to achieve its outcomes.
The best hope is that the new Prime Minister and the rest of PNG's ruling elite really have learned from the appalling economic performance and the unrest of the past few years and are willing to build on the Morauta reforms.
But progress will be slow and very difficult.
And, as the Howard Government no doubt is reluctantly realising, it will require substantially higher levels of (only very loosely tied) aid from Australia to smooth the way.
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