PNG to organise its SOEs into the Kumul Structure

Transcript

The Papua New Guinea Prime Minister, Peter O'Neill, says state-owned enterprises will have more independence and power under the new Kumul Structure.

He says the agencies will be less prone to government interference under the system to be tabled in parliament in its next session.

Through the Kumul Structure the government plans to create the Kumul Trust to be responsible for all state entities now under the Independent Public Business Corporation.

Kumul Petroleum will take over all petroleum assets and Kumul Mining will be responsible for all public mining assets.

The National newspaper reports Mr O'Neill saying it will ensure boards of directors and management take ownership of the decisions they make, ensuring more services for the people and more financial rewards to the shareholders.

Don Wiseman asked the executive director of the PNG Institute of National Affairs, Paul Barker, whether it can achieve these promises.

PAUL BARKER: Well that remains to be seen but certainly there was some grounds for rationalising. You did have more than one entity with overlapping responsibilities, particularly for the mining and petroleum equities that the state has. And clearly the government has ambitions of acquiring substantial additional equity in different resource projects. So the state owned enterprises have certainly been a cause of major concern, they've been a major bottleneck for development particularly some of the utilities, power, telecommunications and so on in PNG but there was certainly room for a considerable improvement in accountability and management as highlighted in a major Asia Development Bank report showing PNG really trailing behind pretty well everywhere else.

DON WISEMAN: Government departments in PNG have often performed poorly haven't they, and this is a lack of capacity, it's a lack of resourcing, and it's still happening these days?

PB: Yes unfortunately the state and the state enterprises and widely seen as the major bottleneck for development. And many within the government itself recognise this and prefer increasingly to refer various functions out to the private sector, to the churches and civil society organisations, to actually implement delivery of public goods and services.

DW: That's an admission of a lack of capacity, isn't it?

PB: It is. Well going back to a time when Sir Mekere Morauta was Prime Minister, he was launching the process of privatisation. Not so much because he believed in it per se but because of the incapacity of government to resist appointing cronies to board and management positions. And that really has been the biggest problem that has been faced. It is a lot of capable people have been trained through the system have worked with these organisations but it has been very hard with the patronage system in PNG to resist appointing supporters and others usually without the suitable skills and experience to these top board positions and management posts.

DW: In terms of an SOE structure or a more robust one, there is still going to be this issue of a lack of capacity and you're going to end up aren't you potentially here with one very large and powerful organisation, the Kumul Trust, because it will have all those resources under its wing.

PB: That's absolutely true. Just shuffling the portfolio around isn't going to make much difference unless there is a real commitment to transparency, appointment of top professionals, Papua New Guineans, overseas people where necessary, but really the most suitable people who are at the cutting edge of these industries. And unfortunately we often find well one that hasn't occurred, but also when there have been partnerships with international or overseas companies that PNG negotiates from a position of weakness and lack of professionality.

DW: Papua New Guineans overall, happy with this idea do you think?

PB: I think there is a lot of scepticism and concern because the government has been very good in the rhetoric saying they are going to change a lot of things and then at the end of the day it looks like old wine in new bottles. So really the government will have to demonstrate that there is this commitment to this greater transparency and that really there are going to be transparent mechanisms of selection and appointment of managers, board members, and that the accounts are going to be a lot more open and transparent. Because over recent years the IPBC or the state enterprises have operated very independently, they've been managing their own funds, they've been not transferring dividends in their totality across to the state. They haven't been working in accordance with any real yardsticks. The ADB review highlighted that and the poor performance. But the state owned enterprises have accumulated a certain amount which has been held outside the government system and they have sometimes been funding projects of various sorts of their own volition, independently of these SOEs. Now of course they are meant to be putting proceeds from export earnings, taxation from the mining sector, is meant to go into the sovereign wealth fund, and hopefully that would be the case with respect to the state owned enterprises as well. And the state has of course made a commitment to the EIPI, extractive industry transparency initiative process, but we need to actually put this all into effect and make sure that there is a high level of auditing and accountability.