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Saturday 15 Dec 2018 | 15:44 | SYDNEY
Saturday 15 Dec 2018 | 15:44 | SYDNEY

What next for Papua New Guinea?

Sunset in Papua New Guinea's Highlands, September 2017 (Photo: Moss/Flickr)

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6 December 2017 17:36

It has been a tumultuous year for Australia's nearest neighbour.

The protracted and controversial elections in Papua New Guinea took up most of 2017, with Peter O'Neill winning a second term and cementing his position as the most formidable politician of his generation. The government announced an ambitious 100-day plan of reform to move the country in a more positive direction. The plan came to an end at the weekend, and while progress has been made, reform looks to have stalled. Last week's budget brought more bad news, showing the challenges of attempting a course correction given the government's stark fiscal position. With the cost of hosting the APEC leaders' summit next year only adding to tightening fiscal pressures, the scope for much-needed reform looks limited.

Compounding the pressure is the difficulty of making an objective assessment of where PNG stands and identifying the most pressing priorities. Quality data is scarce and incomplete, trends are difficult to establish and validate, and prognostications about PNG's future tend to be dogmatic and politicised. The Lowy Institute, through a new series of papers, aims to help fill in some of these gaps by assessing the contemporary state of PNG, and where it might go in the future. We have brought together experts from across their respected fields, drawing on the best available evidence, to assess the state of various parts of PNG.

The series begins with Bal Kama assessing local politics, a hard task in a year of such profound political upheaval. Kama argues that the country's recent political stability has come at the cost of weakening the legislative authority of the parliament. This has been exacerbated by the government's moves to control critical electoral funding through the District Service Improvement Program and Provincial Service Improvement Program, thereby controlling MPs' behaviour. While the legal system remains robust, cracks are appearing as it suffers under the strain of one of the most litigious societies in the world. Kama foresees growing political dysfunction, exacerbated by a marginalisation of the traditional bureaucracy. The results of the 2017 election illustrate an increasing risk of regional factionalisation among the political elite that could further complicate a messy process of decentralisation.

Paul Barker and I discuss the bumpy road of progress in PNG society. We show that on many indicators the country's rapid population growth is outpacing development progress, and service delivery is struggling to keep up. Growing urbanisation is increasing the burden on service providers. More than 40% of the population is under the age of 14 and soon to enter an already underemployed workforce. Women are severely marginalised. The small formal sector is growing, but employment needs are not being met by an underskilled domestic workforce. Without significant investment and smart policy implementation focused on developing the human capital of PNG, future generations will lack opportunity and be further marginalised. The country has some policies and legislation in place to turn things around, but resources and implementation have been lacking.

Sinclair Dinnen discusses internal security trends and prospects, outlining the prevalence of crime and interpersonal violence, corruption, illegal firearms, resource-poaching and transnational crime. While the drivers of these issues are complex and multidimensional, they are exacerbated by the neglect and politicisation of the PNG police force. Ineffective public policing and widespread insecurity provide the context for the rapid growth of the private security sector, which now outnumbers police three to one. The expansion of private security forces threatens to further undermine investment in public security, but may prompt the government to engage in security governance in a more holistic way.

A collection of experts, led by David Osborne, examine the current state of PNG's economy. Their paper provides an assessment of macroeconomic stability and of fiscal policy and debt. On the former, the authors chart the deterioration of PNG's monetary situation and argue for greater exchange rate flexibility to restore equilibrium and investor confidence. On fiscal policy and debt, the authors argue that revenue and expenditure volatility combined with revenue leakage has been a critical destabiliser for effective planning and expenditure. The chances of debt distress are currently low, but of growing concern.

Craig Lawrence provides an overview of the state of infrastructure, focusing on telecommunications, transport, energy, and urban water. He argues that the physical stock of infrastructure assets in PNG is insufficient to deliver the economic and social services needed to drive faster economic growth and improve human development. Effective national infrastructure planning and funding and the role of the Independent Consumer and Competition Commission will be critical for infrastructure improvement in the years ahead.

Finally, Jenny Hayward-Jones discusses the changing nature of geopolitics in PNG. She argues that geopolitics in the Pacific are typically benign, but this is beginning to change with the emergence of China as a growing power in the region. Meanwhile, the government in Port Moresby is financially constrained and focused on domestic challenges, and its ability to manage a range of existing and foreign interests is very limited. The APEC leaders' summit in 2018 provides an opportunity to market PNG's economic potential, but could damage its international reputation if not managed effectively. Australia will assist with this, but will need to work harder to restore and maintain its legitimacy as PNG's closest partner.

I round out the series attempting to interpret what this all means for PNG's future, and what some future scenarios might look like. Accepting that this process is about as reliable as staring into a crystal ball, I outline three potential scenarios for the country: 'gradual improvement', 'muddling through', and 'accelerated decline'. Given current trends along with growing societal and economic pressures, the most likely scenario for PNG is a continued muddling through, or slow muddling down, in the immediate to medium term. Should demographic change and resource sector revenue volatility stabilise, together with a refocusing of investment on the development of domestic human capital, the long-term prospects for the country look more promising.

The Lowy Institute has a deep and long-standing commitment to our nearest neighbour, and we hope that this body of work will add to the discussion among PNG experts and policymakers, and contribute to the foundation of objective assessment from which progressive reforms can be drawn.

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