The Governor of Papua New Guinea's Enga province, Peter Ipatas, says if Australian personnel assume line positions as part of an enhanced aid offer it will create a false impression that PNG is a failed state.
Australia and PNG formalised a deal last week for a team of 300 police and officials to be sent to the country to restore law and order and rebuild the public service.
It has been confirmed they will take line positions, including the likelihood an Australian will be second in command of the police force.
Mr Ipatas has praised the government for securing additional aid but says the Australians should only be there as advisors.
"but if you have them in line departments and making decisions this is in a sense running the show. It seems that it will appear we are a sort of failed state which we are not. We are not that worse off. We have our problems but we can rectify them."
Mr Ipatas says the hundreds of millions of dollars involved could be better spent on overseas training for Papua New Guineans.