'Wish Lists': Are They Compatible with National Government Objectives?

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'Wish Lists': Are They Compatible with National Government Objectives? PACIFIC ECONOMIC BULLETIN Policy dialogue Landowner ‘wish lists’: are they compatible with national government objectives? Samuel Kriss Koyama National Centre for Development Studies, The Australian National Unviersity From November 1998 to January 2001, the the Department of Petroleum and Energy, author was the Coordinator of the Central becomes more and more wary of the ‘wish Moran Petroleum Development Project lists’ (also known as ‘shopping’ or (through the Coordination and Liaison infrastructure lists) with which it will be Branch of the Petroleum Division of the confronted. Department of Petroleum and Energy), which These wish lists can provide the basis covers Petroleum Development Licence 5 and for negotiations during the Development is the newest petroleum development field in Forum, but are they compatible with national Papua New Guinea. This petroleum field government objectives? There is also the was initially producing under the Extended question of whether the wish list items, if Well Testing (EWT) program from early 1998 agreed, will be honoured.1 in the PDL 2 portion of the field and It is not a question of whether these commenced EWT in the PDL 5 side in early commitments are impossible to honour, but 2000. As such the Moran oil field is a unitised rather, whether they are in line with the petroleum licence field in that it is producing government’s planning framework; as the oil from two different licence areas. Departments of Planning and Monitoring By early 2001, the Moran oil field will and Treasury and Finance will only honour have moved from EWT to full-field production commitments that are in line with government after consultations through a Development policy initiatives and planning framework. Forum (as required under S.48 of the Oil and This paper explores whether separate Gas Act 1998) and signing of a Development wish lists or a combined landowner, local- Agreement with all relevant stakeholders, level government(s) and Southern Highlands including the landowners, respective local- Provincial Government Position Paper, when level governments and the Southern tabled during the Moran Development Highlands Provincial Government and the Forum, will be compatible with the National Government of Papua New Guinea. Government’s planning framework. As the Central Moran Petroleum Mining and petroleum development Development Project considers a Development Forum that would pave the way After political independence in 1975, Papua for full-field development in PDL 5, the New Guinea began working towards Government of Papua New Guinea, through attaining economic independence. This was 128 Pacific Economic Bulletin Volume 16 Number 1 May 2001 © Asia Pacific Press PACIFIC ECONOMIC BULLETIN Policy dialogue an enormous challenge, given that more than In addition, the Frieda Copper Mine and 85 per cent of the indigenous population are the Ramu Nickel and Cobalt mine are rural-based agriculturists. As well, Papua expected to commence production in the next New Guinea’s terrain poses difficulties for five years or so. In the petroleum sector, the communications and economic development. PNG Gas Project will commence production Moreover, there are more than 800 languages and sale of dry gas to Australia between 2003 and with a multitude of cultures, the people and 2005. are divided by tribalism. Of real concern also The current mining and petroleum is a lack of skilled labour and a general lack projects in Papua New Guinea have of financial resources for development. maintained the economic viability of Papua Overlaying these challenges has been an New Guinea in the face of the loss of export escalating law and order problem. income and tax revenue with the closure of With Papua New Guinea’s heavy Panguna, coupled with a general slump in dependence on imports and a limited supply the economy. In fact, these projects have more of export goods, the Budget was largely than made up for the loss of production from supported by development assistance, such Panguna. For example, in 1993, export as Australian aid, and other international incomes from minerals and petroleum was and domestic funding from donor agencies more than twice the level during 1988, before including the World Bank and International the premature closure of the Panguna copper Monetary Fund (IMF). mine on the island of Bougainville. The The development of resource projects, mining and petroleum sector’s contribution particularly mining and petroleum projects, to economic growth and development of to generate much-needed export revenue, Papua New Guinea went from nothing in became the prime concern of the 1991 to 25 per cent of total exports by 1994 government. The Panguna Copper Mine, (AusAID 1996). which began operations in 1972, was initially the most important single Provincial government systems and the contributor to export earnings and internal reforms government revenue. Panguna was later supported by the Ok Tedi mine in 1984 and At independence, Papua New Guinea Misima Goldmine in 1989. inherited a large, centralised bureaucracy. After Misima came the Porgera goldmine Soon after independence, secessionist in 1990 which allowed the Hides Gas Project pressures, mainly from Bougainville and other to produce gas, which was converted to districts in the New Guinea islands, led to the electricity for the power needs of Porgera. decision to transfer certain government Lihir and the Tolukuma goldmines followed, powers and functions to the districts, together and later other smaller mines emerged. with the financial resources necessary to carry In the petroleum sector, the Kutubu out these functions. These arrangements were Project commenced oil production in 1992, embodied in the Organic Law of 1977, and followed by the Gobe Project, which began were effected over the next three years. As a producing oil in April 1998. The Moran result provincial governments today are Extended Well Test (EWT) program in PDL 2 largely responsible for recurrent expenditure also commenced in February 1998 and EWT related to their transferred functions. This, in in the proposed PDL 5 commenced essence, is the ‘financial autonomy’ of the production in April 2000. By early 2001 provinces. Only capital expenditures are still Moran Oil field is expected to move into full- controlled by the national Government field production.2 (Goodman, Lepani and Morawetz 1988). 129 Pacific Economic Bulletin Volume 16 Number 1 May 2001 © Asia Pacific Press PACIFIC ECONOMIC BULLETIN Policy dialogue However, numerous provincial govern- drafting and operational difficulties. ments have failed miserably in performing Administrative weaknesses are particularly their functions satisfactorily, which included evident in planning and budgetary the delivery of much needed services to their functions. The task of developing an effective constituents. Costs of running provincial planning capability has been complicated by governments have risen dramatically but the fragmentation of responsibilities inherent these have not translated into the delivery of in the reform (AusAID 1996). essential services and the overall develop- It was, therefore, not surprising that ment in the Provinces. This situation is Prime Minister Mekere Morauta commented complicated by poorly equipped and trained at the National Governors’ Council personnel, lack of infrastructure and conference in Rabaul equipment, and nepotism, cronyism or The decentralised system of ethnocentrism (wantok-ism) in the recruitment government under the current and promotion of personnel. Bribery and reforms is at a crisis point in terms corruption are the norm within administration of delivery of basic and essential and are major contributing factors to the services…there was a dire need to running down of the provincial government re-examine the system with a view to repairing its most glaring system (Goodman, Lepani and Morawetz weaknesses (The National, 10 1988). As a direct consequence, many August 2000:1). provincial governments have been Prime Minister Morauta reiterated that the suspended and investigated for alleged time was now ripe to ‘…re-examine the maladministration or mismanagement and relationships between Waigani, the misappropriation. provinces and local-level governments’. In light of the above, provincial government reforms were introduced as part The Development Forum of the structural reforms encouraged by the World Bank and the International Monetary In the late 1980s, the national government, Fund (AusAID 1996). under the direction of the then Prime The Organic Law on Provincial and Minister, Sir Rabbie Namaliu, developed a Local Level Government (OLP&LLG)— number of policies aimed to increase passed in July 1995—introduced a new provincial government and landowner system of provincial and local-level involvement in the development of resource governments. The origin of these reforms was projects. One of these policies was disillusionment with the former provincial Development Forum. The forum concept was government system. The reforms resulted in then first applied to the approval process for a radical restructuring of the system of the Porgera gold mine in April 1989 and is government and included the abolition of now accepted practice for all major mining separately elected provincial governments and petroleum projects (West 1992). which were replaced with provincial In the petroleum sector, all current assemblies headed by a Governor, who is also projects have undergone this process, and the sitting Provincial member
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