Business and Development

The High Cost Of Self-Reliance' In

An Austere' Papua New Guinea

One of Papua New Guinea’s first tastes of what it is like to be independent came in September vith Finance Minister Julian Chan’s Budget, which he described as “self-reliant” and “austere”. With Australian aid K 36 million below what was expected, he announced big cuts in government spending, vhich will rub off throughout the economy.

Public reaction to the budget was nixed. Some people thought it was air; one critic called it “terrible”, lut from whatever angle it is viewed, Jr Chan was obviously on the right rack in warning the people that they /ould have to live within their means, hat the next three years could be nugh.

The time will come when Austra an direct aid will be phased out. *apua New Guinea would probably /ant it that way, for there is a dignity bout independence. Any Australian ssistance in the long term is more kely to be through loans than direct rants.

However, the Australian aid offer, Ithough disappointing, could not be sfused. The government found itself i a very tough situation, which Mr 'han described as a national emer ency.

Mr Chan has restructured the taxa on system to abolish most conces ions, and increase the general rate y about 12 per cent. He is budgeting Dr increased departmental spending f about K 35.7 million (about 16 per ent), but most of this will go in igher salaries and wages for national üblic servants, rather than into de elopment projects or a stepping-up f government services.

To gain more revenue he put up 3e duties on luxury imports, and in reased stamp duties on cheques from t to 6t. But there were no increases i company tax, duties on cars, liquor r tobacco products. Perhaps he is eserving those for the future, for they re items which finance ministers and ■easurers find hard to leave alone, lowever, an increase of any magni jde in company tax could be ounter-productive, by driving away 3vestment incentives.

Mr Chan said PNG was still a poor ountry, but the hopes of the people ad been aroused and demands were lounting for great increases in all

kinds of benefits which only a rich country could afford. There was nothing about political independence which automatically made PNG richer.

He warned that people would have to work hard for the extra benefits they wanted.

Mr Chan replaced concessional tax deductions in favour of a 10 per cent rebate with a maximum limit of K 250 for each taxpayer. The mini mum taxable income level rose from Kl 2 to KlB a week, an apparent give away, offset by the rise of 12 per

cent in general rates. All taxpayers, other than low-income earners, will pay more, with bigger increases for higher incomes. Low-income earners with dependants will benefit from a minimum rebate of K3O for each dependant.

Concessional deductions were largely an Australian phenomenon, and many Papua New Guineans were not aware they could claim them.

Concessional deductions which disap peared were those for dependants (ex cept the K3O for low income earners), medical, funeral and educational ex penses, life assurance, superannuation, contributions, and gifts to charitable organisations. Deductions for ex penses incurred in earning income re main.

Higher customs duties apply to electrical appliances, photographic and sound equipment, pleasure boats and cosmetics. The duty for domestic air conditioners rose from 10 per cent to 45 per cent. The exemption from duty of basic food items was continued.

Departmental spending is estimated at K 216.4 million. The highest de partmental allocations were K 45.9 million to education, and K 27.8 million to health. The allocation for universities is K 15.3 million, com pared with Kl 3 million last year.

The Office of Minerals and Energy and Ok Tedi Development Co, and the Purari hydro-electric power scheme received allocations totalling K 6.5 million. Bougainville will re ceive K 4.14 million for capital works, but the money will be channelled through government agencies because of a breakdown in negotiations with the Bougainville interim provincial government.

Money for the works programme will be K 42.2 million, about KlO million higher than last year. The allocation for the rural improvement programme is K 6 million.

In an effort to combat the rising

crime rate the budget allocated 15.3 per cent more to recurrent law and order functions. The police force will get an additional K 15.1 million.

Spending on corrective institutions will rise by $2.4 million.

The defence allocation is K 16.25 million, part of which will be met by a special grant from Australia. The spending on agriculture will rise from K 15.2 million to K 19.3 million. Agri culture had the highest priority rating in the scale set by the Budget Priori ties Committee for the allocation of funds.

Mr D. Clarke, president of the Rabaul Chamber of Commerce, after describing the budget as “terrible” said that increased taxation, added to the naturalisation laws, would prompt expatriates to leave PNG. His counterpart in the Lae Chamber of Commerce, Mr Tim Leahy, said the budget was very fair, and he was sup ported by Mr Jim Seeto, president of the Lae Chinese Association.

The Planters Association was criti cal of the tax on speed boats. A spokesman claimed this would send up the cost of operating plantations. For many plantations, a speed boat was not a luxury Mr C. Gregory, lecturer in econo mics at the University of PNG, said the budget would be burdensome for national workers. Expatriate business men and villagers would not be seriously affected. He also thought the government should have considered the tax holiday provisions for busi nesses.

The Public Service Association launched a national campaign against budget policies and what it claimed was a breach by the government of industrial obligations to workers in public employment. Protest meetings and demonstrations were arranged at which the general secretary, Mr Jacob T. Lemeki, and officers of the asso ciation were to speak on the implica tions of the government’s financial measures.

The sweet smell

of success

The Fiji Government, as a 90 per cent shareholder in the Fiji Sugar Corporation, will be the main bene ficiary in the corporation’s post-tax net profit of $6,392,047, in its latest financial year. In the previous year the profit was $974,458. The corpora tion recommended a dividend of 10 per cent which requires $1,850,000.

The Fiji Government will receive $1,665,000 in dividends, which should help Finance Minister Charles Stinson when he prepares his 1976 budget.

The directors report that the in dustry could face difficulties, unless sugar production increased.