PNG economy needs drastic shakeup - Polye
Papua New Guinea's Opposition Leader paints a grim picture of the state of the country's economy and calls for drastic action.
The leader of the Papua New Guinea Opposition, Don Polye, says the government is insolvent and is already cutting funding to key sectors. This comes amid wide criticism of the Peter O'Neill Government's handling of the economy and predictions of a 20 fall in revenue and a widening deficit.
Mr O'Neill says critics of the state of the economy are just those with vested interests. He says the PNG economy is stable and robust enough to ride out the current dip in commodity prices. Mr O'Neill says unlike many countries, PNG has good cover in foreign exchange reserves - and that most of its debt is domestic. He says cuts would be made to non-priority areas but not health, education, law and order, and infrastructure.
But Don Polye painted a contrasting picture of the economy, as he spoke to Don Wiseman:
DON POLYE: From my view, the government is insolvent. They have a problem with cash flow. The truth is they have cut funding to the department of works for infrastructure, they've cut funding to education, health, Electoral Commission, all other departments of state have had their funds cut and the Treasury bills are under-subscribed by the private sector; the foreign reserve that was at 5 to 6 billion US dollars two years ago has now depleted down to slightly below two million US dollars; the GDP growth that was projected in 2014 to grow at 21 percent has been revised down in 2015 to 15%; in the first quarter state of the economy statement from Treasury it was further revised to 11%; and at the moment the indications are that it is between 9 and 10 percent GDP growth. The other notable fact is that the UBS loan of three billion, taken by government, is eating up all the proceeds to the tune of three billion kina, proceeds coming from the Papua New Guinea LNG Project have been consumed by (paying off) the loan, and if the government defaults in repayment, then the government loses to UBS the 10.1% shares in Oil Search. Also, the prime minister has talked about the debt to GDP ratio at 33%, that is not true. The debt to GDP ratio is at 40%. That is far above the (threshold laid out by the) Fiscal Responsibilities Act.
DON WISEMAN: For the ordinary person in Papua New Guinea, are they starting to feel this yet or is that still down the road?
DP: They're feeling it already because the Papua New Guineans, they cannot afford the cost of food items in Port Moresby or Lae and other places. And also, the people are already being affected, especially the education sector.
DW: If you were in government, you would do what? Because you can't really crank up taxes, can you?
DP: Ah no, I can't crank up taxes. If I was in the government what I would do is immediately take some very definite measures. What I would be doing is I would cut those expenditures in less priority areas...
DW: And they are?
DP: Areas like building infrastructure - huge, huge infrastructure in Port Moresby that are economically unviable, spending up to two or three hundred million kina in one piece of infrastructure; roads that are being built, getting all monies that would have gone to the Highlands Highway maintenance or to other roads throughout Papua New Guinea into just doing new roads in Port Moresby that have no economic value. They're just being done because all contractors and preferred contractors are concentrated in Port Moresby, and those roads are being done at very excessive contract prices. I would cut down on such expenditure, I would be looking at the important economic assets of the nation, like the major highways. I would be selling out the 10.1% shares in Oil Search, it is unnecessary, the state doesn't earn any return on this, it is very minimal, to recoup the money. And I would also ensure the sovereign wealth fund is properly legislated on the floor (of parliament) to get the proceeds of the extractive industry in to that fund, and look at building the agriculture industry as the number one industry in PNG to create a sustainable economy.
DW: You can do these sorts of things of course, can't you, but the reality is that this is a problem to a certain extent that's outside of the government's control: commodities across the board and around the world seem to have slumped in value quite dramatically and that's what is causing the problem. You can't do anything about that.
DP: No that's a matter beyond the control of Papua New Guinea but we have been lucky with the LNG Project, that we have these proceeds coming in. But at the moment those proceeds are being mismanaged, and it's to the tune of three billion kina every year. And also those funds should be put to developing the agriculture sector, like I alluded to. And if we can create the agriculture sector in the next five years or so, although you've got commodity prices down for the extractive industries, I believe that agriculture can rescue PNG and that's where my focus would be.
DW: For many, many years there's been talk of systemic corruption in PNG within the government, within the government system. Now you talk about three billion dollars in the income from the LNG project, are you suggesting that this has been got rid of in a corrupt way.
DP: Well I am strongly suggesting that because the 3 billion kina UBS loan was not taken through the constitutional process by sanction of parliament. It was taken outside of parliament, breaking all laws. And also the proceeds of LNG coming in are not channelled through the public accounts system of government. It is channelled by the government through an entity it has created, called the NPCP (National Petroleum Company PNG) which is not a business or an established company but was established just a few months ago. And funds are channelled there, repaying the loan, as well as being managed in a very untransparent manner, and that is the cry out by the people of this nation, especially by academia, the professional institutions and other bodies at present in Papua New Guinea.
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