by BRIAN GOMEZ
Many reasons for underlying optimism

One of the sad realities confronting the public is a tendency towards negative attitudes and views, and this column can certainly sometimes appear inclined that way.
One underlying reason for such views is the widespread notion that Papua New Guinea is a country that is rich with natural resources and yet a large proportion of its population is faced with poverty.
This seems a contradiction but in reality it is not. Economists for a long time have viewed many resource rich countries as places that suffer from what has been termed the “Dutch disease”.
This is a scenario that has been very real for PNG for more than two decades after independence because exports of copper, gold and oil greatly bolstered the value of the kina and made it difficult for other sectors of the economy to be competitive.
Agriculture and other sectors found it hard to compete with cheaply priced exports though a tiny proportion of Papua New Guineans enjoyed cheap international travel and other indirect benefits.
That is just one aspect of the reality.
On another hand, the country can be very rich in resources, but if these have yet to be discovered and then developed to create a cash flow, their existence remains just a theoretical reality. Yet another aspect is the likelihood that even when a resource is developed, it can take many years before the full spin off benefits is felt.
Fortunately in PNG, landowners derive immediate royalties from sale of copper, gold, oil and timber but sadly, in the past, much of this flow of wealth has been lost or misused for a variety of reasons.
Over a 10-year period, Southern Highlands landowners derived some K200 million in royalties from oil production, and the Government gained some K2 billion in corporate tax from this source.
For many, resource projects, such as Ok Tedi, Lihir and Ramu nickel, it takes many years for the developers to recoup on their massive expenditures and, hence, to start paying the Government corporate tax.
It is when this stage is reached that there are major benefits flowing, via the budget, to people throughout the country.
So while many people have written off the past performances of government because little headway has been made on various economic and social indicators this is arguably an excessively negative viewpoint.
From my perception all past PNG leaders have been good even though their successes and failures have been variable, sometimes influenced by factors well beyond the control of any individual.
Possibly the leader in most recent times that has attracted the most negative media, especially from overseas, has been the late Sir Bill Skate. But one has to remember that when he took office as prime minister, the country was faced with one of the worst droughts in its history.
The economy had been in a bad downslide for several years by then, and the Australian government and World Bank, for a variety of reasons, chose to simultaneously tighten the financial squeeze on the PNG Government. The situation for PM Skate became totally untenable.
When PNG gained its independence, the country’s financial resources were inadequate for provision of health, education and other services for an expansive and mountainous country with problems of access for much of the relatively small population.
It was for this reason that the Australian government supplemented the PNG budget with an annual grant of A$300 million that continues to this day.
The record suggests that successive governments during the first decade after independence had done a pretty good job in improving social indicators such as infant mortality rates and average life spans of people.
This is indirect evidence that the Australian aid was put to good use even though it declined sharply in real terms over the years.
In those early years the Bougainville copper mine helped greatly with investment, export growth, employment and cash flows and acted as a magnet for mineral exploration activities in other parts of the country.
However, the seeds of later conflict had already been set when the Australian government had in 1972 approved development of the mine, largely against the wishes of many of the women landowners in Bougainville’s matriarchal society.
The Australian government of the day emphasised the idea of Crown land, a notion that remains quite foreign to PNG landholders to this day.
Since Bougainville descended into a spiral of conflict, death and destruction and removed vast amount of financial and other resources from the government’s coffer.
Besides the vast export revenues and taxes that were extinguished almost overnight, PNG in the succeeding period also had to face a series of terrible natural disasters such as volcanic eruptions, the Aitape tsunami (remember how fast Bill Skate got there?) and the 1997 drought and Asian economic crisis that slashed commodity export prices.
In terms of government macroeconomic planning there obviously were major miscalculations along the way.
While the shutdown of the Bougainville mine created a major cloud of uncertainty over the nation’s financial and economic fortunes, the governments in the early 1990s thought the Ok Tedi mine and oil production from Kutubu was the start of a long-term bonanza. Bad decisions were made that ended in the enforced decision to devalue the kina.
With that mentality governments of the day maintained policies that ensured that throughout the 1990s exploration for petroleum and minerals dwindled to near all-time lows. No new forestry projects, the third biggest export earner, started in this period.
What this has meant until major policy changes occurred in 2003 was that the so-called resources wealth of the nation lay dormant, undiscovered and untapped and investors, both foreign and local, stayed away.
But through all these periods of sometimes intense difficulties, there were good things happening with some Papua New Guineans starting to make their mark in the world of science and business, both at home and abroad.
Many positive developments have occurred in the current decade and the government of the 8th Parliament will have every opportunity to build on a “virtuous cycle” that is already here.