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Misplaced priorities of governments Bottom Line would like to convey seasonal greetings to readers of this column. Most of us treat this time of the year as a period of reflection and planning for the New Year.This column would like to reflect on recent events and potential future directions. One thing is clear. There has been a tremendous amount of good luck in the past three years with windfall Government revenues contributing to increased Government spending within a scenario of broadly balanced budgets. There will probably be little disagreement that this flow of additional funds has been entirely fortuitous, coming at a time of economic crisis caused by a decade of setbacks on many fronts. Firstly, I would like to demonstrate why it is that windfall revenues could be considered a matter of good luck. Take a look at our major exports. Crude oil exports have been declining virtually since production began in 1992-93 with no real effort made to boost exploration and reverse declining production until 2003. Although oil exports fell to a low of 12.56 million barrels in 2004 and has since stabilised at around 14 million barrels, a steady pick-up in oil prices has meant that export revenues rose to a record K2.99 billion in 2006. This was more than double the K1.43 billion export value in 2002 when oil exports totalled 15.4 million barrels, a figure not likely to be matched until gas-wet fields such as Hides are developed in the next decade. The story is the same for gold. Production last year totalled 56.7 tonnes, the lowest annual figure since 44.3 tonnes was produced in 1997. Nevertheless, gold exports fetched a record of just over K3 billion in 2006. Most of us are familiar with the lag effect when actions today only produce results three years or more later. For example, it might take an exploration project 10 years before it is converted to a producing mine though, some, like Ramu nickel and Frieda River, have taken more than three decades. In the decade to 2002 when grassroots exploration activity virtually disappeared, there was no lag effect to look forward to, except for advanced projects like Simberi and Sinivit, that had been stalled prior to the slowdown. The more conducive recent atmosphere for mineral exploration has resulted in forecasts that gold production would hit a record 78.3 tonnes next year and rise to over 85 tonnes by 2011. We will not discuss copper, the biggest contributor to surplus Government revenues, since output comes entirely from only one company, Ok Tedi, although post-2003 changes mean there would be two or three producers around the time Ok Tedi is shut down in 2013. The story is much the same on the agricultural front. Most crops have shown little or no increase in output and higher prices, when they occurred, were the main factor in boosting export earnings. After agricultural and log exports earnings hit a record of K1.95 billion in 2005, up from just over K1 billion in 2002, they dropped in 2006 to K1.65 billion. Two agricultural commodities can be singled out for showing production gains in recent years. These are copra and palm oil. Copra’s improved productivity resulted from a National Government decision to jettison the marketing monopoly of the former Copra Marketing Board (CMB), which had brought the sector to its knees by 2002. The pick up has been fairly dramatic with copra exports rising from 8,400 tonnes in 2003 to 22,300 tonnes in 2005. This contrasted with a record 99,000 tonnes in 1996. The two copra oil producers in Madang and Rabaul had been contemplating closure of their operations due to an inability to source domestic copra supplies, but the demise of the CMB also gave them new life and improved marketing prospects. Palm oil is the only commodity to have experienced steady growth through the years. Exports grew from 327,000 tonnes in 2003 to a projected 382,600 tonnes this year. Much of this growth has been driven by New Britain Palm Oil, which is headquartered in Kimbe, West New Britain. By and large governments have been poor managers of the economy from the point of view of stagnating production, even though the population has grown by about one million people in the past six years. Bottom Line remains concerned these trends, mainly flowing from a lack of private investments, may also be the pattern for the future, although the improved economic environment and infrastructure, could help reverse this trend. Other niggling concerns persist. It has been widely reported that poker machines are a blight on family lives and yet the Somare Government has chosen in its 2008 budget to shore up the profits of the operators. Former Singapore prime minister Lee Kuan Yew was always against setting up of casinos in his country because he said public servants would spend too much time in them to the detriment of government services. It would contribute to a poor work ethic, he maintained. But now that Singapore is among the top 10 countries in terms of per capita incomes, it too is pursuing the establishment of casinos. Bottom Line is just as fearful that plans for a Government-owned television network, just as the case with casinos, is another good example of questionable priorities. Government figures show that 27% of primary school aged children, from seven to 12, are not able to attend school. The National Research Institute believes this is a gross under-estimate and the proportion not in school, amounts to around 40% in NCD and 60% nationwide. These are children, who in 10-15 years time, will be deemed to be unemployable and a burden on society in terms of their social and economic needs. Sure there is lots of positive things a government-owned television station might be able to do, but how many people would place such a service ahead of the goal of universal basic education which PNG, in theory, remains committed to. Bottom Line has raised similar questions in the past about the value of putting aside K500 million, initially for the gas pipeline to Australia, and currently for the liquefied natural gas project. In many ways government policies, past and present, appear destined to remain supportive of a dualistic economy, where a minority of people are able to prosper, while many more have no hope of aspiring to a brighter future.
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