Papua New Guinea is one of Australia’s closest neighbours, yet it largely goes unnoticed. It is a country with aapproximately 80 per cent of its population living in rural areas, with very little access to modern life. Many of the country’s tribes live in the mountainous terrain, isolated from each other and the outside world. However, these tribes live on resource-rich land and that presents many challenges for a country like PNG. Despite the close proximity, it is a country that goes largely unnoticed within Australia. However, with recent developments in PNG, Australia should start paying attention.
Pivot spoke with a local source in PNG, to find out more about the current challenges for PNG, the direction the country is heading in and what that means for Australia.
Where does the money go?
The Papua New Guinean economy relies heavily on forestry, mining and petroleum industries. In all of these industries, developers – mainly foreign corporations – are required to pay taxes and joint venture equity to state-owned corporations, who then distribute royalties to Indigenous landowners.
While these royalties are often aimed at improving local communities and funding social programs, mismanagement of funds is notorious in PNG. There is an appetite for pie in the sky commercial development rather than schools, clinics and roads that are needed by the local communities. Landowner royalty is often subject to litigation that is referred for endless mediation. With one example being that in one licence area, the oil royalty has been held up in the courts for over 15 years.
The government’s failure to pass on royalties to local landowners has led to calls for foreign corporations to identify and pay the communities themselves, rather than go through government streams. However, the possibility of change for a government system that is deeply rooted in corruption remains unlikely.
Corruption in PNG is rampant at the highest levels of government. The Corruption Perceptions Index ranks PNG as a country that is highly corrupt, with PNG scoring 28 out of 100; 100 being very clean and zero being highly corrupt.
In 2018, the PNG government purchased 40 Maserati vehicles for the APEC conference to be held in Port Morseby, a transaction widely condemned by the media and PNG public. Following the conference, the luxury cars, as well as 300 other cars imported by the government were widely reported as having gone missing. Despite the government claiming that most cars have since been returned, those cars that were returned were seriously damaged or had parts missing. Regardless, many cars still remain unaccounted for.
PNG has a poor record of prosecuting corruption. A bill to create an Independent Commission Against Corruption was introduced to parliament six years before being passed. However, funding is likely to be inadequate. The Police have almost no capacity to investigate complex fraud and are unwilling to investigate anyone in a position of power.
China’s Belt and Road
In June 2018, PNG became the first Pacific nation to sign up to China’s Belt and Road initiative. Signing up to the Belt and Road Initiative commits PNG to working with China on infrastructure projects moving forward. While this may help modernise PNG and provide essential infrastructure, the government of PNG have essentially entered into a ‘debt trap’ diplomacy agreement.
The strings attached to China’s Belt and Road Initiative became apparent globally in 2015. The failure of the Sri Lankan government to make repayments under the Belt and Road Initiative resulted in Sri Lanka signing over a 70 per cent share of the deep sea port at Hambantota to Beijing for 99 years. Sri Lanka’s inability to repay China’s loans should serve as a warning to other signatories to the Belt and Road Initiative, including PNG.
As a result of the Belt and Road Initiative, Chinese presence in PNG is growing. Our source in PNG said: “the Chinese investment in this country is everywhere, everywhere you look.”
However, the increased investment in PNG is failing to benefit individuals in PNG. Our source went on to state, “you often see Chinese people doing jobs that Papua New Guineans could do, building roads, building wharfs.”
The increasing political influence of China in PNG is already being seen, with PNG siding with China in multilateral organisations. In July 2020, PNG openly supported China’s harsh new security legislation with regard to Hong Kong when it was raised by the UN Human Rights Council. It seems PNG has already fallen into the ‘debt trap’ diplomacy, and it will be a struggle for them to get out.
Where does this leave Australia?
In November 2019, Australian loaned PNG $440 million considered a soft loan. However is unlikely to ever be repaid. While the Australian Government denied that the loan was completely unrelated to China’s growing influence, it understood that PNG was courting both Australia and China for urgent financial support to prop up its budget.
While Australia already provides more than $500 million per year to PNG in aid, this money is closely monitored to fund specific projects. Australia generally works with multilateral organisations such as the World Bank and International Monetary Fund when providing funding for aid in PNG. However, the $440 million can be used at the absolute discretion of the PNG government. Australia has not provided PNG a loan of this kind in more than two decades due to the high levels of corruption within government agencies.
Pivot’s source in PNG expressed concerns over where this money would go. Instead, our source suggested that Australia should continue to “give aid and measure the value of it” rather than providing pure cash loans. However, Australia taking a harder line on where aid funds are spent may push PNG further towards China.
What does this mean for the future of PNG?
PNG Prime Minister James Marape recently has launched his campaign to ‘Take Back PNG’.
As part of this campaign, the government has amended the legislation governing oil, gas and mining extraction, but the amendment acts as a deterrent to foreign investment and will only add to PNG’s economic woes.
The PM advocates agriculture as the pathway to sustainability, but with increasing financial reliance on both Australia and China, as well as high levels of corruption, and a mainly uneducated population, it is unlikely that the government will be able to ‘take back PNG’.
Given the tertiary education levels are low, it is hard to image any home-grown industry. The government mantra may appeal to populist sentiment, but the resource sector has come to a grinding halt, and this raises even more questions about the role China may play and what PNG society will look like in years to come.
The horrible truth as well is that we haven’t even mentioned COVID-19.
