by
BRIAN GOMEZ
Improved investment flows will build a stronger economy
One of the key reasons why Papua New
Guinea will remain less than successful in making rapid strides
forward in terms of economic and social development is the lack of
hard-nosed, strategic planning.
Regular readers of this column will recall my previous criticism
of the Medium Term Development Strategy which, nevertheless, has
been widely accepted as a good road map that has been endorsed by
the World Bank and Asian Development Bank.
Even though it does provide a road map for the way forward by
highlighting plans to tackle a variety of socio-economic problems,
from law and order to health and education, Bottom Line felt it
was flawed because it was premised on annual growth of less than
3%.
Strictly speaking what this meant was that in the MTDS period from
2005-10, there would minimal growth, if any, in per capita
incomes.
As has been the case during the lost decade of the 1990s, the
number of people living in poverty would grow.
Many economists argue that the structural impediments to faster
growth are too great but Bottom Line refuses to accept such a
defeatist attitude.
Indeed if the country plans for 3% growth what happens when we
fall short?
Anyhow growth this year is projected at 4.5%, well outside the
MTDS forecast.
Admittedly this is because of the massive surge in mineral and oil
export revenues that could not have been foreseen when the report
was drawn up in 2005.
The MTDS is a product of a ‘steady as she goes’ philosophy that
not much can be done to change longer term trends and there is no
effort to tweak the system in ways that might nurture even faster
growth or better ‘social engineering’.
There is one certain avenue for faster economic growth given the
lack of financial resources available to the government, leaving
aside recent ‘windfall’ revenues from resources.
This would come from the ability of the government to attract
greater flows of foreign direct investment.
In most years, Papua New Guinea is only able to attract tens of
millions of dollars, outside the billions that go to build
projects like Ok Tedi and Lihir, compared with billions that each
year goes into a variety of activities in countries like
Singapore, Malaysia and Thailand.
The MTDS should have set some FDI targets and the government
should have done its utmost to meet them, enabling jobs growth in
the private sector to complement the impact of public sector
spending.
In order to realistically achieve this kind of goal, there would
have to be many significant reforms and government leaders and
bureaucrats would have to work in many different ways to make the
country more attractive to overseas investors.
Indeed, these actions will also encourage local entrepreneurs and
investors. As we know, one of the biggest impediments remains the
problem of accessing land, whether it is for agriculture or
industry.
When companies survey the investment scenario in areas such as
agriculture and industry, one would soon appreciate their
reluctance to invest.
Take for example the Chinese salt project in Central province.
Many years after its establishment, it continues to flounder
because of issues related to landownership.
The government could play a decisive role in facilitating better
understanding and agreement between the parties involved but it
hasn’t.
In recent years, a major South Korean company has come forward
with plans for cassava-based ethanol production but the proposal
continues to languish because of a lack of commitment, and
dissension between local participants.
This is one side of the coin as far as investments are concerned
because, on the other side, are local companies that already have
a successful track record that can be easily encouraged to do a
lot more.
We have some top quality operators in various sectors that, given
the right incentives, would do a lot more to promote commercial
agricultural and industrial initiatives.
For many of them, adequate access to land is also an issue.
One only has to recall what happened when a local company bravely
tried to introduce a revolutionary domestic shipping service not
so long ago.
How much longer will
it take for another party
to try that again even though good public transportation is one of
the biggest challenges to future growth and development.
Instead of becoming failed operators of businesses, as governments
often tend to do, it would be far better if future governments
work to facilitate and nurture a better business climate.
If it can do this properly, the government would arguably also be
able focus better on its ability to core functions of providing
improved health, education and other services.
