by
Brian Gomez
‘Windfall’ revenues could
be utilised better
Long time readers of this column will
be aware that from time to time Bottom Line raises controversial
views on various subjects as we probe issues of the day to
provoke discussion and debate about new directions.
It is in light I want to provoke public debate on one of the
most important recent occurrences – the availability of large
amounts of funds from budget surpluses that are being used
through successive supplementary budgets.
This commentary is, indeed, timely because another such
supplementary budget, involving additional expenditure of some
K1.5 billion, will be brought down again when Parliament sits
next month.
As with the mythical ‘all roads lead to Rome’, in many
circumstances there are many routes to the same destination.
And this is especially true for the pathways to economic
development.
Governments of every hue, from democratic to communist, and
those for large economies like the United States and China or
tiny ones like Papua New Guinea or Brunei are confronted by one
daily challenge – the need to make choices.
They juggle with priorities all the time. How much to spend on
primary education versus higher education or technical and
vocational schools?
Should more be spent on defence rather than education or health?
When does ministerial or government expenditure on overseas
travel become excessive?
All of this is a prelude to a problematic issue – the question
of how government ‘windfall’ revenues from mineral and oil
exports are being spent.
We are talking about massive amounts of money. The next
supplementary budget will account for more than double the aid –
in the form of grants – PNG receives from Australia, by far the
biggest provider of financial assistance.
Even larger sums have been accounted for in the three or four
supplementary budgets brought down in the last couple of years.
Before discussing government spending priorities, I would like
to bring into some focus the problem of corruption, a subject
that Bottom Line, as intimated before, prefers to regard more as
straight out embezzlement and theft rather than classical cases
of corruption.
Recent history suggests a significant proportion of funds would
end up in the pockets of corrupt officials and politicians,
ranging from the national and provincial to the local level.
This is an undeniable fact. It is on the public record that
various ‘culprits’ over time have made big and fraudulent claims
against the government.
In some circumstances, the actual payout ends up being bigger
than the original claim!
The problems in this area extends all the way from the highly
simplistic (and unbelievable) ability of some individuals to
direct government funds straight into personal bank accounts
although, oftentimes, more subtle pathways are used.
If we have to take a stab in the dark to suggest how much money
is lost in this way, I would probably put the starting point at
around 15% to 20%.
That amount of money from the next supplementary budget would
possibly be adequate to give every child in the country free
education at least for one year and possibly get many thousands
more, among the 25-30% now not attending school, to be able to
do so.
This, of course, would be unsustainable use of these funds
because the ‘windfall’ revenues will evaporate once commodity
prices fall towards their longer term trend lines.
Since there is little that can be done about this problem in the
short term – public attitudes have to change and there is a need
for better policing in a broad sense – I am much more concerned
about whether additional funds are being put to their best use.
Certainly some of the rehabilitation work that has been approved
is of the utmost importance.
By way of example, it is disgraceful that our prestigious
University of Papua New Guinea is in such a dilapidated
condition because no money has been spent in 30 years to fix
broken homes and buildings or to keep its library well stocked.
And certainly so many schools at primary and secondary levels
are in dire need of functional tables, chairs, desks, books,
etc, and need to be looked after.
Certainly some other key infrastructure, such as roads or health
clinics and aid posts, would fall in this category.
But going beyond these circumstances, I would like to argue that
the Medium Term Development Strategy is not the best guide to
the best use of ‘windfall’ revenues.
The MTDS is a flawed document that is woefully out of date in
terms of current economic realities, including the additional
revenues available to the government.
I would prefer to consider the MTDS a kind of road map for
longer term development and progress even though I don’t believe
it attempted to address such a crucial question as the right of
every Papua New Guinean child to be able to enjoy at least six
years of primary education.
If the huge budget surpluses are short term ‘windfalls’, it
should be utilised with this clearly in mind and not just as a
big honey pot for various pet projects.
If one uses a sports analogy, the MTDS would be akin to a
marathon race, whereas the use of ‘windfall’ revenues would be
more like a tough 400m hurdles event.
The question that the MTDS does not address, and neither have
any of the recent supplementary budgets, is how does the nation
get ‘the biggest bang for our buck’.
To answer that, one would have to confront issues such as –
which are the cheapest roads that can be built or fixed so that
much of the 40% or more of the annual coffee crop, now rotting
on the vine, can re-enter international markets not just next
year but every year from now on; the same question needs to be
addressed for copra and cocoa and for other potential exports
crops.
How effective would a pool of these funds be in raising the
calorific intake of the nation’s subsistence farmers – the most
needy people – through a programme of crop diversification or by
bolstering their access to the cash economy?
Unfortunately, in the search for more sustainable outcomes time
is not on our side since these one-off expenditures are only a
temporary boost to government spending.
We should all hope that wisdom and plenty of hard work will be
put in by responsible politicians and bureaucrats, who have the
fortunes of millions of people in their hands, as they ponder
the massively difficult task of bringing down an exemplary
supplementary budget next month..
