Scratch The Surface Of Png's

Economics And What’S There?

Most Australian businessmen are ignorant of business potential in Asian and Pacific countries, Mr Tom Allen, a former executive director of Papua New Guinea’s National Investment and Develop ment Authority, told PIM in a May interview.

Mr Allen was speaking in Sydney following two one-day workshops on the subject of Operations in Papua New Guinea and the Im plications of the Forthcoming Elec tions.

The workshops were organised by

the Sydney-based Implementation

and Management Group Pty Ltd, of which Mr Allen is a director.

Twenty-two businessmen, mostly at director level, had paid an un disclosed sum to attend.

Each workshop was divided into four sessions: The Political En vironment. Present and Future, which heard a paper by Mr Tony Voutas. a former principal adviser to the PNG Prime Minister: The Economic and Financial En vironment. which was addressed by economist Dr Vernon Harvey. The Investment Climate, dealt with by Mr Allen: and a panel-type dis cussion.

Mr Allen told PIM he thought the workshops had been a considerable success.

"It’s simply a fact of life that most Australian businesses don't know how to grapple with the problems of working in the region.” he said. "We feel that the workshops, at the very least, scratched the surface of the issues involved.”

He said the papers presented at the workshops, and the subsequent discussions, had in the main taken a positive view of the prospects of foreign investment in PNG There had. for example, been a close examination of the so-called Third Investment Priorities Schedule published by the PNG Government in January.

Mr Allen said: “This is an in teresting document because it not only reflects the government's na tional investment strategy, with its strong emphasis on rural develop

ment. but also a much greater accep tance of foreign investment as a ve hicle for development than was the case two or three years ago. This stems largely from the government’s increased confidence in its ability to control foreign investors and to en sure that they operate in the national interest.”

The schedule extended the list of “priority activities” in which foreign investors could take part, and introduced a new category call ed "open activities” in which they would also be welcome. However, it still contained a list of industries re served for Papua New Guineans, in which foreign investment is forbid den. and another of "restricted ac tivities”. in which foreign investors could only take part in joint ven tures with Papua New Guineans.

The "priority activities” included specific mineral and petroleum re sources, integrated timber projects in a number of locations, fishing and

fish processing, agricultural pro

ducts such as tea. grain crops, oil palm and sugar, and manufacturing industries which further process the output of the agricultural, fisheries, forestry and mineral sectors. “Open activities” covered a wide range of investment opportunities in prim ary. manufacturing and service in dustries.

Mr Allen said that reservations on investing in PNG still lingered in the minds of many companies because of the 1974 negotiation of the Bougainville copper agreement, and the failure of the PNG Govern ment to reach agreement with Ken necott over the Ok Tedi copper development.

He went on: “Existing foreign en terprises operating in the country have been there for a number of years, and before independence and self-government they were subject to very few controls over their op erations. They thus found it difficult to cope with a new government which did introduce controls over their investment plans.

“On the other hand, new investors still look on PNG as a newly-inde pendent country which needs to be

approached with caution like all other newly-independent or developing countries.

“The country has to produce a track record.

“It is well on the way to doing this and it seems likely that an upsurge in investment in PNG could be forthcoming during the next couple of years.

"There are still many problems in setting up there, but these problems are not insurmountable.”

Discussion on the political en vironment and the prospects of the 1977 parliamentary elections had proved quite an eye-opener for many participants. Mr Allen said.

The general consensus was that, whatever the outcome of the elec tions. present government policies are likely to persist.

Mr Allen said: “At the national level, there is very little difference between the platforms of the three

major parties.

“Pangu and the People's Progress Party are not campaigning on a united front, and PPP leader Mr Julius Chan has indirectly indicated that he may be willing to form alter native alliances.

“What is happening at the na tional level is that the third party, the United Party, which was the main force in the Opposition in the old House, is attacking both Pangu and the PPP for their lack of per formance in government, for the elitist behaviour of ministers, for the political appointments they have made to the public service, and. by implication, for their alleged cor ruption.

“But. with the major policy issue which divided these parties in the past the timing of self-govern ment and independence now well and truly out of the way, serious policy differences are minimal.”

If any difference does exist it would be that the PPP and the con servative faction of the United Party favour individual enterprise among Papua New Guineans, whereas Pangu would favour more com munal business development.

Mr Allen said: “In any discussion

of PNG’s political structure it must be recognised that modern political debates on national issues are wit nessed and understood by only a privileged 10% of the community who are within the modern media network. For the bulk of the popula tion. politics is about local issues.”

Mr Allen summed up: “The elec tion results are likely to be in conclusive. with no party having a clear majority. This means that the real contest for power is not in the election struggle, but in the subse quent wheeling and dealing to build a coalition government.

“An element of stability is imbed ded into the political system by the lack of differentiation between par ties and the focus on local rather than national issues, by the bulk of the population.”

On trade union activity in PNG, a subject of keen interest to workshop participants. Mr Allen said the in terpretation was offered that organ ised labour in PNG has become “a kind of aristocracy”.

He said; “The unions were the first PNG group to become organ ised and make concerted demands on the government. Through their organisational strength and infor mal links with the government they have elevated urban labour to a pri vileged position. Their members do better than the rest of the com munity.

“Their organisational attitudes are being modified by their growing involvement as unions in the run ning of private enterprises.

"While there is the prospect of labour/government confrontations Port Moresby unions have several of their proteges training in the Soviet Union the long-term trend should be one of comparative industrial peace.”

The public service was presented as “the weakest resource” in PNG’s political-administrative structure, suffering, especially in rural areas, from frequent transfers, poor com munications and a lack of co-or dination.

On Papua New Guinea’s financial situation, the workshop was told that the government’s “hard cur rency strategy” had certainly work ed to date.

Mr Allen said: “There have been successive revaluations of the kina relative to the Australian dollar, the balance of payments situation has been healthy, there is a commitment

of aid over a long period from Australia, important trade and com mercial relations agreements have been reached with Australia and the European Economic Community (Lome Convention), and a credit worthiness rating has been given to PNG by the World Bank. There is little likelihood, therefore, of the present approach in financial policy being changed by any new govern ment coming into power.”

Conditions could change in the

future which would require a new set of policies. For example, if aid from Australia were cut off, no ma jor new venture (such as the Ok Tedi or Freida River copper projects) could be undertaken, or if prices of all exports went down considerably, then PNG could be placed in a difficult situation.

However, the likelihood of all these things occurring simultaneously appeared to be minimal.