by BRIAN GOMEZ
Resource sector growth promises improved
living standards

Last week Bottom Line outlined reasons why the current resources boom, mainly underwritten by high commodity prices, is becoming a longer term reality for Papua New Guinea.
Even though commodity prices are likely to fall from their current peaks, growth in the resources sector is going to be sustained by the opening up of many new mining and gas-related projects.
Although the fate of Highlands Pacific, and its Kainantu gold project, lies in the balance, two other mines are opening up in the next few months at Sinivit and Simberi.
Both projects have recently announced promising new gold hits within their prospective mining leases.
Additional confirmation of the importance of the ongoing resources boom, and its relevance to the PNG economy, has been underlined by the latest report by the International Monetary Fund, following its annual consultations in PNG.
Rather than take the pessimistic line of so many economists and commentators, the IMF has affirmed that effective use of the country’s minerals wealth could help the economy grow twice as fast and contribute to significant reductions in poverty.
The IMF said good fiscal policies, along with more effective use of the mineral wealth, could enable PNG to grow at a sustainable rate of 7-8% annually.
In fact, the five-year period from 2009-2013 should see double digit growth rates that will be fuelled by spending on construction and commissioning of Ramu nickel, two petrochemical plants and an LNG project.
Nevertheless, the path ahead is certainly not going to be an easy one given current preparations for a national election and uncertainties regarding the shape of a future coalition government.
But there is reason for optimism that the virtuous cycle of the past four years is not about to be derailed.
A doubling in the rate of economic growth, on a sustained basis, would require discipline and some level of dynamism by the country’s leaders.
Among the current concerns are the ongoing calls for significantly more funding for police and electoral operations in the coming elections, especially after the allocation of allocations that were much larger than those in 2002.
The government’s bureaucrats and planners, and their political leaders, seem to adopt a somewhat ambivalent attitude towards development issues and, in the past, appear happy to accept minimal growth targets.
This was true of the Medium Term Development Strategy and remains true of many projects undertaken outside the resources sector.
One has to only look at the Chinese-backed salt project in Central province, which stands as a symbol of why foreign investors would remain wary of investing in PNG.
The South Korean plan for a large cassava-based ethanol project was mooted a few years ago, but progress to date has been slow.
We get the same story, but with a different theme, for the large coffee plantations that remained close in the Highlands.
In these cases, landowner issues appear to provide the stumbling block. The problem is that there is no mechanism in place for intervention by provincial and national governments to expedite these processes and to smooth the way forward, not just for the developer but also for landowners.
Another example of inertia and lethargy is the approach towards the Highlands Highway.
Vast sums of money are constantly being directed to solving long-running problems, but results do not seem to match resources that have been utilised.
There seems to be no authority in place to ensure the Highlands Highway is being improved in a coordinated fashion. Transparency is minimal.
The public mostly hears of what is going on when some form of trouble occurs.
Sometimes incomplete work is abandoned.
The IMF suggests that some of the government revenues from minerals should be used for priority infrastructure projects that enhance social welfare.
Another issue brought up in last week’s Bottom Line was the need for additional development spending in the agriculture sector in a concerted effort to improve the livelihoods of subsistence farmers.
Good roads and shipping facilities are important avenues for farmers to seek out new markets and improved livelihoods, as is access to better and more varied farming inputs.
The IMF is also keen that privatisation is progressed more rapidly, but Bottom Line is not totally enamoured with this for a variety of reasons, including the strong nationalistic response that greets such endeavours.
Government utilities will play a critical role in any attempt to speed up development and improve the rate of economic growth.
Although it appears Telikom PNG, PNG Power and others have greatly improved their performances in recent times, there is no guarantee the clock will not be turned back after this election or at a succeeding one.
If we end up with boards that hold endless meetings while the organisations continue to operate in a sclerotic fashion, these utilities will hamper development rather than smoothing the way for improved living standards.
The current court cases involving Telikom PNG and the ICCC need to be resolved as soon as possible so the incoming government will be able to better handle the evolving situation.
The two mobile phone operators are innocent victims and deserve to be told, as soon as possible, where they stand with their investments.
This is just fair play.
There has been greatly increased clarity about government policy towards the resources sector, and the present surge in exploration and investment spending is partly a result of this openness and transparency.
Something similar is needed for the telecommunications sector and soon.
The IMF spelt out the issue quite bluntly: “As basic utility services remain costly and unreliable, directors recommended that the necessary regulatory framework be quickly finalised as a first step toward introducing competition in the public enterprise sector.
“Beyond this, the authorities were also encouraged to reconsider their decision not to move forward on privatisation.”