'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 (AusAID the Moran Project will also have its own 1996). Development Forum. Each of these projects The Organic Law requires a considerable has approached its Development Forum amount of enabling legislation to make it differently, depending on considerations operational. The Law has already been such as costs, timing, political interference, subject to numerous amendments, which landowner cooperation, cooperation from reflect both weaknesses in the legislative provincial governments, sister government

130

Pacific Economic Bulletin Volume 16 Number 1 May 2001 © Asia Pacific Press PACIFIC ECONOMIC BULLETIN Policy dialogue

departments and line agencies and other In essence, the agreements consist of lists factors. of services and benefits, which are to be made The purpose of the Development Forum available by government, combined with a is to establish a position on issues related to vague commitment by landowners to a proposed development project. However, cooperate and consult. over the years this process has not been followed. For some participants and Landowner wish lists or a combined organisers, the Forum became more to do stakeholder position paper? with how benefits, initially due to the With the realisation that the Development government, would be split between national Forum has undertaken the approach of government, provincial government(s), and in negotiating benefits as its underlying more recent times, local-level government(s) concern, the Department of Petroleum and and landowners. In particular, the question Energy anticipates that the stakeholders of equity participation in the project was seen (excluding the State and developers) will as a primary concern. However, to others the bring their position papers to the Forum. Forum was seen as the ideal avenue for Ideally, landowners, respective local-level political–bureaucratic interaction (West 1992). governments and provincial governments The Forum has evolved to become the should come up with a single position paper venue where all stakeholders come together incorporating their combined developmental to discuss ‘benefit packages’ that will be aspirations. handed over by the national government to This position paper should contain the respective provincial government(s), local- following, as per the Oil and Gas Act (1998): level governments and landowners from the First, the single position paper should have State’s share in the project. In the petroleum a section that addresses the distribution of sector, with the passage of the Oil and Gas royalties between landowners, local-level Act of 1998, this has now become mandatory. government(s) and the provincial This practice was succinctly expressed government concerned (S.168 and S.170). It by Anthony Power as should also indicate how the equity benefits …a ‘Melanesian’ government’s will be shared between the landowners and approach to provide benefits to local-level government(s) (S.167 & S.170), landowners to persuade them to and whether there will be a further sharing allow the government and the of the 100 per cent Development Levy that developer access to their land to will be paid directly by the Developer to the extract the resource for the benefit concerned provincial government, and if so, of the country as a whole (Power 1997:17). to whom and by what percentage share (S.160). Further to this, the position paper The end product has been agreements should clarify which infrastructure projects reached between the various stakeholders. or social needs are to be put in place, These agreements usually took the form of particularly within the confines of the Memoranda of Agreements (MOAs) and now project area boundary which may also Development Agreements (S.50 of the Oil and include district (that is, local-level Gas Act, 1998) and are reached between government) needs. Those needs should be • the State of Papua New Guinea and in line with provincial government plans landowners for those areas. • the State of Papua New Guinea and the In short, a position paper developed by respective provincial government(s) the three parties should address their • provincial governments and landowners. requirements, taking into account the ability

131

Pacific Economic Bulletin Volume 16 Number 1 May 2001 © Asia Pacific Press PACIFIC ECONOMIC BULLETIN Policy dialogue

of the State, the developers and the provincial guide the position paper to a more realistic government to meet those requirements. outcome considering the ability of the State However, the reality is far from the ideal. to ‘spend’ in that particular project area. In the Moran Project, for instance, landowner wish lists were initially prepared by Moran National Government Planning Framework landowner leaders in an ad hoc manner and The Department of Planning and without any close consultation with the Monitoring (formerly the National Planning people in the project area.3 After realising Office) is vested with the responsibility to that the initial infrastructure list was plan and monitor all national government unrealistic, Chevron invited officers of the expenditures. It is the responsibility of this Resource Monitoring Branch of the Southern Department to oversee the national govern- Highlands Provincial Government (SHPG) ment’s planning framework. The National to conduct a fact-finding trip into the Moran Government’s Planning Framework is guided area to assess the need for essential social by the following policies; The Public services and other infrastructure. The SHPG Investment Program (PIP), the Medium Term team put together its findings in a position Development Strategy (MTDS), the paper, copies of which were submitted to the Development Appropriation Document Department of Petroleum and Energy in (1997) and Project Cycle Process (Medium September 1999. Term Development Strategy 1997–2002). After considering this position paper, The national government planning the Department commenced correspondence framework on its own is ineffective, with the SHPG Administration. In early particularly when it has planning 2000, the Hulia local-level government submitted their own wish list of infra- implications for the provinces and their structure requirements to the Department. respective local-level governments. Only The position paper and wish list were when there are planning frameworks prepared separately, without any close established within the local areas, and which consultation with the national government, then dovetail into the provincial planning through the Department of Petroleum and frameworks and subsequently into the Energy, to establish whether these lists were national planning framework, can coherent realistic or if they were within means of the and balanced development be assured. This national government to fulfil them. There sets the stage for ‘bottom up’ planning as was an obvious need for a wish list to be envisaged in the Organic Law on Provincial consolidated, under the supervision and and Local Level Government (Medium Term scrutiny of the SHPG, to portray a unified Development Strategy 1997–2002). and more realistic expectation. The Minister for Planning and Such a position paper, when tabled Monitoring, Moi Avei, has stated that during the Moran Development Forum …the Government’s key planning negotiations, will guide and assist the Forum document, the Medium Term in arriving at an agreement suited to all Development Strategy (MTDS) was parties, limiting opportunities for the country’s ‘road map’ for creating an environment that will unnecessary discussion of unrealistic enable rural Papua New Guineans expectations. The position paper will provide to achieve higher living standards the basis for the Forum discussions and may through a more productive compliment S.174 of the Oil and Gas Act (that agricultural sector. In order to is, the 20 per cent limitation), if guided well. create this environment, the MTDS Conversely, S.174 may be the tool used to emphasises the need for the

132

Pacific Economic Bulletin Volume 16 Number 1 May 2001 © Asia Pacific Press PACIFIC ECONOMIC BULLETIN Policy dialogue

Government to focus on basic built outside of the provincial education education, primary health care, plan, who will be responsible for allocating infrastructure maintenance, law teachers, materials, conducting inspection and order and on increasing the programs, maintenance and so on?4 These opportunities for private sector questions must be addressed if there is to be (Post Courier, 10 August 2000). long-term sustainability of infrastructure It is important that there is a ‘bottom up’ benefits from resources projects. approach to planning and prioritisation of It is imperative that district plans must projects in the context of the overall dovetail into provincial plans, which must, government planning framework. Currently, in turn, dovetail into national government it seems that provinces, let alone their local- plans. Only then will there be compatibility level governments, lack developmental between national government aspirations consciousness. Either they are not and landowner, local-level government and ‘development conscious’ or they lack the provincial government aspirations. This will ability to plan and bring about development ensure consistency and sustainability in the within their localities. use of scarce resources and encourages proper planning, implementation and Compatibility of aspirations management of projects to the satisfaction of This paper focuses on the simple premise that all parties concerned. there must be some form of compatibility It is unfortunate that some ‘mitigation’ between national government aspirations, as projects built by developers in petroleum contained in its planning framework, and project areas do not fit into any level of the the aspirations, visions and plans of government planning framework. They are provincial governments and their districts ‘appeasement’ projects built by the (that is, local-level governments). developers who would rather deal with Therefore, only where there is some unrealistic demands by landowners than compatibility, rationality, coherence and risk the possibility of jeopardising the oil or interface between the various levels of gas project by not meeting those demands. government, in terms of their planning These mitigation projects are usually framework, can we be assured that much- considered at a time when ‘the developer is needed financial resources are channeled anxious to get on with construction of the from the national level down to the provinces project and landowners are anxious to see to finance much-needed infrastructure some benefits’ (Power 1997:18). This is a projects within the isolated rural result of government-funded projects being communities. Otherwise, there will be a slow and unreliable and the developer’s continual occurrence of uncoordinated money spent in this manner is ‘important in pockets of infrastructure development building up trust with the project area people’ appearing within these communities. Such (Power 1997:18) as well as providing early projects may seem good in the short term, landowner involvement in business but prove to be detrimental to good opportunities. However, proper planning is governance and administration in the longer still essential for long-term sustainability and term. good governance. If a project is built because of landowner Such an approach may assist in insistence or coercion and that project is not addressing the Prime Minister‘s point that part of the national government, provincial, The gap in getting government or district plan, how can it be sustained in services to the people is wider than the longer term? For instance, if a school is at Independence…government has

133

found itself at a crisis point in discussions, a quicker resolution of issues terms of delivery of basic and and a timely closure and signing of a essential services. Therefore, we Development Agreement. have no choice but to re-examine This process, when adhered to, should the relationship between Waigani, ensure that the requests in a consolidated the provinces and local-level government (Mekere Morauta, Post position paper would be reflective of local- Courier, 10 August 2000) level government aspirations as well as It is against the backdrop of these provincial government’s short, medium and long-term plans, which should dovetail into comments that there is now the need to bring the government’s overall aspirations, to the the Moran Project area landowners together with their respective local-level government(s) benefit of the the national economy and the and the Southern Highlands Provincial local areas. Government. They must then come up with a position paper that is reflective of their Notes ‘combined’ or integrated plans, and which should then be compatible with national 1 In the past, the State has agreed to government plans. unrealistic items on ‘wish lists’ while under pressure to sign agreements within Conclusion schedule. 2 The Moran Oil field has two petroleum reserves of 84 million barrels of oil and is The Oil and Gas Act (1998) has provided, about a third the initial size of the Kutubu under S.48, that a Development Forum is now a pre-requisite of full-field development Project. 3 The Project Area is made up of the of all petroleum projects. For the record, the proposed PDL 5, Block 1934. Central Moran Petroleum Development 4 There are a couple of schools in the Project will be the first project to test this legislation. Kutubu Project Area which have been built of permanent materials under the It is anticipated that the Moran Tax Credit Scheme but are not in use. Development Forum will provide the venue where project area landowners, their local- Author’s note level government(s) and the Southern Highlands Provincial Government will The views expressed in this article are bring to the negotiating table a consolidated entirely those of the author and are not position paper which should have taken on necessarily those of the Moran Petroleum board the requirements of the Oil and Gas Project or the Papua New Guinea Department Act (1998), particularly S.174 (with its 20 per of Petroleum and Energy. cent limit). The author is currently pursuing A consolidated position paper, guided graduate studies in Environmental by a 20 per cent limit, would curb the Management and Development with the demands of the various parties, and set out National Centre for Development Studies at the parameters within which the The Australian National University in Development Forum discussions will be Canberra. conducted. This will promote greater cooperation and understanding amongst the ‘active’ Forum participants and ensure a smooth progression of the Forum

134

References

Australian Agency for International Development (AusAID), 1996. The Economy of Papua New Guinea, AusAID, Canberra. Connell J. and Howitt R. (eds), 1991. Mining and Indigenous Peoples in Australasia, Sydney University Press, Sydney. Goodman R., Lepani C. and Morawetz D., 1988. The Economy of Papua New Guinea: an independent review, National Centre for Development Studies, The Australian University, Canberra. Louvuru, K.A., 1998. Packaging MOA Projects as a subsidiary or small Public Investment Programme: a view to impose and instil discipline and development consciousness in the utilisation of benefits derived from natural resources for equitable distribution as benefits to landowners, Department of Planning and Implementation, Waigani (unpublished paper). Independent State of Papua New Guinea, 1997. Medium Term Development Strategy 1997–2002: a bridge into the 21st century, Presented to the National Parliament on the Occasion of the 1997 National Budget by Moi Avei MP, Minister for National Planning, Waigani. Papua New Guinea, 1998. Oil and Gas Act, No. 49 of 1998, Certified 5 February 1999, Waigani. Power, A.P., 1997. Moran Project Development, Working with landowners: process and principles, a manual prepared for the Kutubu Joint Venture, Mobil Exploration Producing Australia, Port Moresby. West, R., 1992. Development Forum and Benefit Package: a Papua New Guinea initiative, Institute of National Affairs, Working Paper No. 16, Port Moresby.

135