PAPUA NEW GUINEA IN 2000 Taking the Bull by the Horns Mark Tacon During 2000, Prime Minister Sir Mekere Morauta’s un- flinching diagnosis of Papua New Guinea’s (PNG) ills and his evident com- mitment to confronting them continued to inspire considerable international confidence that he could reverse the country’s political and economic decline. By year’s end he had made substantial progress in reviving the country’s economic credibility and had succeeded in passing decisive legislation de- signed to bring order to PNG’s unruly political environment. But crucial negotiations on a formula that balanced Bougainville’s political aspirations with the demands of PNG unity continued to prove elusive. Rebuilding Economic Integrity Morauta’s successes during the year in improving financial management and introducing wide-ranging structural reforms cemented PNG’s rapprochement with the World Bank and International Monetary Fund (IMF), a relationship badly damaged under the previous Skate administration. The passage on March 29 of a revised Central Bank Act, quickly followed by the new Banks and Financial Institutions Act, offered the first real evidence that Morauta could deliver on his promises and permitted the release of an IMF US$115 million stand-by facility. Further progress in macroeconomic stabilization was rewarded in June by a US$90 million World Bank structural adjustment loan that was accompanied by sizeable financial packages from Australia, Japan, and other donors. In October, the government was strongly com- Mark Tacon is Analyst in the External Assessments Bureau, Depart- ment of the Prime Minister and Cabinet, Wellington, New Zealand. The views expressed are the author’s own and do not necessarily reflect the views of the New Zealand government. Asian Survey, 41:1, pp. 143–147. ISSN: 0004–4687 Ó 2001 by The Regents of the University of California/Society. All rights reserved. Send Requests for Permission to Reprint to: Rights and Permissions, University of California Press, Journals Division, 2000 Center St., Ste. 303, Berkeley, CA 94704–1223. 143 144 ASIAN SURVEY, VOL. XLI, NO. 1, JANUARY/FEBRUARY 2001 mended by the IMF in its first review of the government’s economic reform performance. 1 The cornerstone of Morauta’s strategy to salvage the economy, and a cen- tral element in retiring domestic debt, is the wide-scale privatization of state assets. Public enterprises earmarked for sale under an ambitious timetable are the Finance Pacific conglomerate, national flag carrier Air Niugini, Te- likom, Elcom (electricity commission), and the Harbours Board. But Morauta’s determination to restore greater financial transparency and ac- countability in the public sector began to expose malpractice in public bodies on a scale that threatened the privatization process itself. In April Morauta announced a commission of inquiry into massive losses by the National Prov- ident Fund. As the year progressed, fresh revelations of mismanagement, political interference, and debt in other bodies emerged. Elcom, Air Niugini, and Post PNG were discovered to be insolvent, while the compulsory third- party insurer Motor Vehicle Insurance Trust went into liquidation. In Sep- tember, the central bank, demonstrating its new-found powers, took control of PNG Banking Corporation, the prime asset of Finance Pacific. By Octo- ber, Morauta admitted frankly that most of the country’s statuary bodies were technically bankrupt and unsaleable, but he committed the government to proceed with plans to offer Air Niugini for partial sale in April 2001.2 The PNG business sector is particularly encouraged by Morauta’s efforts to remove the barriers to economic growth, especially in the crucial mining and petroleum sectors, which have traditionally contributed about a quarter of PNG’s total GDP. An optimistic 2001 budget, handed down in November, included tax changes designed to encourage investment in resource projects and specifically to boost the prospects of the planned US$3 billion PNG-to- Queensland gas pipeline project. But tax reform may not be enough to over- come the other impediment to business confidence and foreign investment presented by the country’s chronic lawlessness and disorder. In October, Morauta acknowledged there were varying degrees of breakdown within the PNG Defense Force (PNGDF), police, and corrective services and that all were in need of reform. With the PNGDF considered incapable of defending the nation or even attending to its own needs, Australia agreed to provide a 1. “IMF Completes First Review of Papua New Guinea Program and Approves US$24 Mil- lion Credit,” IMF News Brief No. 00/94, October 13, 2000, on the World Wide Web at <http:// www.imf.org/external/np/sec/nb/2000/nb0094.htm> [accessed October 13, 2000]; and “World Bank Praise,” Post-Courier Online (Port Moresby), November 7, 2000, on the World Wide Web at <http://www.postcourier.com.pg /20001107/tuhome.htm> [accessed November 7, 2000]. 2. Rowan Callick, “PNG’s Systemic Corruption Will Cost Australia,” Australian Financial Review, November 8, 2000, p. 15; and “Government Begins Sale of Air Niugini,” National Online, November 24, 2000, on the World Wide Web at <http://www.zipworld.com.au/~na- tional/> [accessed November 24, 2000]. PAPUA NEW GUINEA IN 2000 145 one-time only package of assistance worth almost A $15 million and Morauta announced plans for a Commonwealth-sponsored eminent persons group to oversee an external review of the country’s security structure and needs. The Search for Political Stability Morauta’s economic achievements are particularly notable when viewed in the context of PNG’s notoriously flawed and unpredictable political system in which political graft has become increasingly embedded and where the commitment of politicians to their parties is frequently little more than a state of mind. For most of the year, Morauta enjoyed, at least nominally, a huge parliamentary majority, but he was constantly confronted with the task of holding together an unwieldy coalition while trying to ensure the loyalty of his own deeply factional People’s Democratic Movement (PDM). Several cabinet reshuffles were required to maintain “stability.”3 With an eye on the longer-term challenge to the unitary state posed by political parochialism, Morauta pursued a radical constitutional solution: re- placement of PNG’s current first-past-the-post voting system (which has seen MPs elected on less than 5% of the vote) with a preferential voting system and a political integrity bill designed to reduce parliamentary volatility pri- marily by strengthening the role of parties and penalizing MPs who seek to change party allegiances, often for cash or favor. On August 30, the Organic Law on Integrity of Political Parties and Candidates passed its first reading in Parliament by a vote of 79–0 (amendments to the Constitution require the support of a two-thirds majority—73 MPs—at two sittings, two months apart). But opposition was mounting, including from within the prime minis- ter’s cabinet, to a bill that served notice on the entrenched culture of pa- tronage to which most MPs owe their positions. In the House, resistance to the bill coalesced around the powerful bloc of Highland MPs after Morauta, acting on reports of corruption and mismanagement, suspended the provincial governments of Southern Highlands and Western Province (and threatened similar action against Enga). An attack on Morauta was inevitable. What was unexpected was its direction. On October 31, rather than wait for the introduction of the second vote on the political integrity bill (with a view to rejecting it), Michael Nali, minister of trade and industry and leader of the Sir Julius Chan’s old People’s Progres- sive Party, introduced a motion that Parliament adjourn to January 13. The significance of the motion was that by mid-January the prime minister’s 18- month constitutional immunity from votes of no-confidence would have ex- 3. “PM Vows Political Stability,” ibid., March 8, 2000, at <http://www.zipworld.com.au/~na- tional/>; and “Reshuffle for Stability,” Post-Courier Online, November 6, 2000, at <http:// www.postcourier.com.pg /20001106/mohome.htm> [accessed November 6, 2000]. 146 ASIAN SURVEY, VOL. XLI, NO. 1, JANUARY/FEBRUARY 2001 pired. (The Constitution also states that a successful vote of no-confidence in the 12 months prior to a general election automatically triggers an early elec- tion—which most MPs are unwilling to face because of the high turnover of seats in elections. The next election is scheduled for June 2002.) Nali’s mo- tion was defeated 62–32 and following another motion from Morauta’s sup- porters, which passed on a show of hands, parliament was adjourned until November 13. The ambush threatened seriously to derail the political mo- mentum Morauta had built up. In its wake, he was forced to resort to the parliamentary numbers game himself to both shore up support for the budget and control Parliament’s adjournment so as to span successfully the six- month window between his periods of constitutional protection. A major cabinet reshuffle saw six ministers replaced of whom five, including Deputy Prime Minister Mao Zeming, were members of Morauta’s PDM. Among those brought into cabinet were several like Pangu Pati leader Chris Haiveta, who had been fired by Morauta for disloyalty earlier in the year. Any doubts over the security of Morauta’s position and his reform agenda were soon put to rest, however. On December 11, Parliament voted unani- mously to pass both the budget and the political integrity bill, which, in a last-minute gamble, the government had resubmitted. The house subse- quently adjourned to July 2001.4 Morauta’s legislative victory now allows him to face the future confident that some of the essential underpinnings for national recovery are in place. By the time Parliament resumes in mid-2001, MPs will already have shifted their focus to electioneering and their own political survival.