Economy needs to be on mainstream: Economist

By DALE LUMA
INSTITUTE of National Affairs (INA) executive director Paul Barker says the country is currently caught up in an economic side-alley and needs to get back out into the mainstream.
Barker said Moody’s (international credit rating agency) downgraded PNG’s rating from neutral to negative on the basis of its growing debts and lower-than-expected immediate capacity or inclination to boost its revenue to be able to manage these debts in the shorter term.
“By getting back into the mainstream of economic activity, PNG needs to get its Covid-19 pandemic under control quickly through constraints and a mass voluntary vaccination without unduly disrupting economic or particularly livelihood activity, but very much by disrupting major spreading events and situations,” he said.
“Mainstreaming entails letting the banks do what they should be focused on – lending for investment and housing and other activities that generate jobs and economic activity.”
Barker said the State should ensure reliable land title documentation, credible corporate documentation, and universal, but not onerous corporate taxation.
“Ensuring Government’s various regulatory functions are conducted honestly and efficiently are critical to investment, from land to licensing, permits, etc,” he said.
“It must seek to bring down PNG’s onerously high production costs associated with costly and unreliable power, internet, ports and transport.
“All of which partly come out of State or related monopolies or duopolies, under-capitalised State corporations and over-priced infrastructure and contracts secured by those corporations. Dilly-dallying or setting targets too high with major project contracting does no one any good, any more than sending out the worst signals with untimely project closures, just when revenue was in shortest supply.
“Where projects are socially or environmentally unacceptable, whether certain extractive projects or large scale logging for conversion to oil palm, put a halt to these.
“Where projects are socially and environmentally sound, and investors are genuine, eager and willing, let them proceed without bureaucratic delay or untoward demands, that not only put off this investor, but others besides.
“Put unsuitable legislation that remains hanging like Damocles’s sword over the private sector, to bed once and for all.
“These are major investor disincentives.
“But the issues of ensuring improved opportunities for PNG-owned and operated micro-small to medium enterprises needs be pursued seriously with all actors, including banks, education institutions, legislators and regulators, to seriously address the specific impediments holding back PNG investors.
“Some of these are the same impediments faced by all investors, but others are specific to local investors, including difficulties in accessing finance, title and, with microenterprises, unfair and often illegal competition from foreign operators.
“PNG needs to better address the Covid-19 and restore investor confidence, attract sound investment, boost foreign exchange remissions and availability and boost jobs and revenue, and then manage that revenue effectively.”
Barker said the Government should “stop wanting to be an investor and trying to pick winners and operate businesses”.
“It must focus on its core functions, which are the provision of reliable infrastructure, education, health and other core services, but also to tackle crime and corruption which are both major handicaps to sound investment, but seem to getting worse right now, rather than better,” he said.