Inquiry turns spotlight on PNG aid
p. 38 · Read in the full issue
AUSTRALIAN helicopters given to the Papua New Guinea Defence Force, the secessionist rebellion on Bouganville and gun smuggling through the Torres Strait and PNG to - the pro-independence melanesian guerillas in the Indonesian province of Irian Jaya are all issues you would expect to be at the top of the agenda for Australia’s parlia mentary inquiry 7 into its relations with PNG.
But while the inquiry, which is being conducted by the Joint Parliamentary Com mittee on Foreign Affairs, Defence and Trade, is not shying away from them, there has been an unexpected lack of heat in the debate.
Instead, many of those presenting submis sions to the inquiry 7 focussed on the manage ment of Australia’s massive aid to PNG, and following from that, how Australia can strengthen its relations with its nearest neighbour and former colony without cre ating dependence.
Overwhelmingly that money goes into consolidated revenue as budget aid.
The move to budget aid was intended to give PNG’s post independence government maximum possible control over its
development.
Now, more than 15 years down the track, there is growing feeling that the massive infusion of budget aid, which still accounts for more than 15 per cent of PNG’s annual revenue, is the cause of many of PNG’s problems; that is swelling the public sector and public sector pay packets, making it impossible for the private sector to compete.
Among the more than 80 submissions to the parliamentary inquiry, there has been almost unanimous support for a phase out of budgetary assistance in favour of funding specific projects.
Such a move is expected to go hand in hand with a lucrative minerals boom in PNG and a substantial cut in the total funds flowing from Canberra.
The question is just how soon budget assistance should be
phased out.
Although prime ministers Hawke and Namaliu have nominated the year 2005 as a tentative cut-offdate there have been a few signs so far that there is enough political will to effect
the huge changes required.
Changes which will affect almost every government department and which at this stage are still predicted on the minerals and energy boom predicted for the mid to late 1990’5.
The most radical phase-out proposal has come from the influential Canberra-based Centre for Development Studies
(Ncds).
It has recommended that it take place over five years beginning in 1994 whether or not the minerals boom pays the
dividends expected.
The centre’s Director, Professor Helen Hughes, told the inquiry that rather than giving PNG’s decisionmakers freedom to exercise their independence, budget aid was creating dependence on Australia.
It was now, she said, “the most important issue in Australia/ Papua New Guinea relations”.
According to Professor Hughes, PNG’s economy is in “extremely bad shape”.
While it receives budget support “it will never need to take the politically hard decisions about its expenditure” on wages productivity, education or infrastructure.
Professor Hughes drew a parallel with the situation of Taiwan and South Korea in the 1950’5.
Today, Taiwan and South Korea are two of Asia’s success stories but, as Professor Hughes pointed out, that was far from the case four decades ago.
“They had budget aid in the 1950 s and at the end of the 1950 s they were both regarded as basket
cases,” Hughes told the parliamentary inquiry.
“At that point the United States decided to cut them offbudget aid and reduce aid substantially.
The result was that they had to take some hard decisions and you have the phenomenal growth of those two economies until they are both catching up with other industrial countries.”
While few would agree that conditions in PNG are comparable with those in very mercantile cultures such as South Korea and Taiwan, the point behind Professor Hughes comments is widely acknowledged.
The question then arises as to how the new project aid should be spent.
The non-government aid agencies would like to see more money going to small-scale projects which attack the root causes of major social problems such as law and order, illiteracy and poor health which are undermining the capacity of the PNG economy.
The Melbourne-based Overseas Service Bureau which co ordinates the work of Australian volunteers cites the Ex- Criminal Self Help Group in the Western Highlands province as the sort of success story Australia should be fostering.
There a few hundred former rascals have come together to work on community projects assisted by an Australian volunteer. That project’s emphasis on direct help for the ordinary people of PNG, 85 per cent of whom still live in the rural areas, is one all non-government organisations would
applaud.
Economists such as Professor Ross Garnaut, a senior economic adviser to Australian Prime Minister Bob Hawke, stress the importance of big spending on infrastructure.
Gamaut, like many of the big companies which made submissions to the inquiry, has a good deal of faith in PNG’s economic management but points out it will take several billion dollars to bring its infrastructure up to South-East Asian standards.
According to Garnaut the amount of resources available to provide infrastructure “will depend to a considerable extent on decisions about Australian aid”.
For Professor Hughes and her colleagues, a real reduction in the amount of aid is as crucial as the sectors it flows into.
Less aid would bring down the value of the Kina and of wages, providing the conditions for well-targeted exports such as cut flowers and pot plants for markets in Europe and Japan to flourish.
Professor Hughes says such a strategy could lead to an annual growth rate as high as 9 per cent a year.
The parliamentary inquiry is due to table its recommendations late this year.