Kick-start the economy: Barker

Economist PAUL BARKER predicts a challenging year with Covid-19 impacts still affecting world and PNG’s economy. Below are excerpts from his 2021 economic outlook that he discussed with Business reporter PETER ESILA

ECONOMIST Paul Barker sees 2021 as another challenging year, with the Covid-19 and its economic effects still prevalent around the world, and still impacting PNG.
He also forecast a tough year for PNG leading up to the 2022 national election, “with the temptation for frivolous public expenditure, which particularly now PNG cannot afford”.
Below is his economic outlook.

For PNG, a major focus must be on kick-starting the economy and the long static or declining job market, by addressing major business and investment constraints and boosting domestic and foreign investor confidence, but also encouraging greater local participation and diversity of activities using local capital and skills.
Tasks and priorities for the year should include:

PREVENTING, constraining, managing and moving on from the Covid-19 pandemic.
This remains critical during 2021, even if the virus has not been unduly rapacious in 2020.
Its capacity to mutate and pose a major threat to PNG is ever present, even before any vaccine reaches these shore.
And the need for vigilance and capacity must be sustained and enhanced for future new respiratory or other contagious diseases.
The Covid-19’s arrival in PNG almost coincided with that of the African Swine Fever, a killer disease for pigs, also via Asia. PNG has also had multiple plant and animal pests and diseases arrive over recent years threatening industries, livelihoods and food security.
Vigilance of land, sea and air borders must be reinforced as well as capacity to respond quickly in each case;
SOUND resource management and better oversight and use of the proceeds.
This requires greater transparency over resource management, including using the extractive industries transparency initiative (EITI) process, for transparency of transfers, subnational and landowner transfers, contract transparency, accessible and community participation in social and environmental planning, not just in the extractive sector but in all resource management;
SAFEGUARDING natural resources and opportunities for PNG people in resource projects/ utilisation and economic activities.
This needs open discussion on priorities, including through mechanisms, such as the current national land use planning exercise.
It includes the need for an open forum to help determine the right balance over what resources, business activities and jobs should be restricted exclusively for Papua New Guineans in future, while also encouraging foreign investment and competition to bring in needed capital needed for local job creation, specific skills and quality goods and services;
DIVERSIFYING the economy must gain greater attention, including new technologies, including e-commerce, but with traditional products, notably agricultural innovation and intensification a major emphasis, with a focus on sustainability and consolidation, to reduce marketing costs, gain certification and quality and branding, domestic value adding and developing the local market for domestic products;
ENHANCING PNG’s major role (with international support) in addressing climate change, including safeguarding existing forest, soil and marine resources, reforestation and agro-forestry (and safeguarding associated habitats and biodiversity), but also setting standards and targets in critical areas, notably energy sources and use, notably focus on PNG’s rich renewable energy resources and phased displacement of old carbon-based fuel sources in power generation and transportation (with gas as a transitional power source);
PRUDENT economic and fiscal management is critical to investment and economic confidence and performance and hence the prospects for ordinary Papua New Guineans; with many years of deficit financing of the Budget and growing debt and debt servicing costs, greater attention is required on the costs and performance of the public sector and the inbuilt waste and abuse, including in procurement and overheads (including with the politically controlled SIP grants).
The public deserve a reliable public sector, providing quality public goods, including roads, schools and health facilities.
They cannot afford inefficiencies and abuse, or massive and burdensome debt and debt servicing costs. They also cannot afford bloated or deficient State-owned enterprises (SOEs), some operating as major rent collectors that provide exorbitant conditions and utilise their own revenue, while others remain severely undercapitalised and underperforming.
Government should avoid performing functions that the private sector can perform better, while ensuring that they perform their regulatory functions effectively and transparently, including revenue collection, labour/wages and health and environmental standards.
WIDENING the tax base.
This is an ongoing process, but too much of the cost of Government falls on less than 500,000 formal sector employees, a relatively small number of companies and goods and services tax.
At the end of the day, this requires growing the economy and formal sector, while more effectively formalising businesses that are significant and profitable and should be registered and contributing tax, and should be employing staff on formalised terms.
It also requires that interagency data and cooperation is enhanced, and intelligence used to clamp down on tax avoidance and transfer pricing.
With stronger revenue collection from different sources, the Government could consider lowering the business tax rates to encourage investment, and raising the tax thresholds for lower income earners that are really suffering with the high living costs and challenges posed in 2020 by the Covid-19 and its restrictions.
Ensuring that rents gained from resource investments and license fees from fisheries and other sources actually reach consolidated revenue, rather than waylaid with parallel budgets by SOEs and public authorities, is also critical;
SERIOUSLY addressing violence/conflict, both tribal and inter-community clashes and ongoing fights, violence against women and children, and sorcery accusation related violence;
OPEN Government: For too long, PNG has sought to perform government transactions behind closed doors.
Project financing, resource contracting, revenue, public accounts, much public decision-making and leaders benefits have been kept discreet or only released very belatedly and often partially.
This has enabled non-performance and other abuse.
There have been valuable recent moves towards greater transparency, including through EITI and the open government partnership (OGP) process, including fiscal transparency, and commitment to more open budgeting, contracting, integrated financial management and timely audits.
The new whistleblowers legislation and commitments to rights to Information legislation.
TACKLING corruption and poor public sector performance/service delivery.
In November 2020, Parliament passed the long-heralded Organic Law on the Independent Commission Against Corruption.
K4 million has been committed in the 2021 Budget to progress its establishment, together with funding from the European Union to support the process.
An effective and independent entity to tackle, particularly cases of grand corruption, including resource and contracting corruption, will provide a major step to tackling this scourge that has been progressively undermining the country’s administration, resource management and capacity to deliver public goods.
Corruption is everyone’s business and tackling it is a must, therefore be mainstreamed through public and private/civil society institutions and the public, as the task of addressing this great scourge.
COMPETITION and consumer protection: reviews or PNG’s limited competition and consumer protection laws and capacity were undertaken several years back and the recommendations now need to be applied.
Competition is critical to quality and affordable goods and services, but also requires favourable investment conditions and generally a growing market to ensure that there are competitors eager and willing to invest and supply goods and services, including sometimes competing with SOEs.
More competitive power, ports and telecommunications provision will all, for example, bring down the costs of a wide range of other goods and services, and generate whole new industries and opportunities;
INVESTMENT in education and health (including nutrition and health awareness): the countries that perform the best and most sustainably are not, generally, those with rich natural resources, although these are important, but those that have invested in their people and health, education and skills; the state plays a part in this, as do households and society;
ICT- internet and mobile phones, e-commerce, e-Education and accountability: accessible internet, including through mobile phones, is critical in a modern society and for PNG to participate in the global economy, providing jobs and economic and educational opportunities.
The major bottlenecks must be overcome, such costly new fibre-optic cable, which provides a major capacity and internet gateway, which has remained inaccessible to the local service providers and therefore users for over a year.
Rural mobile towers need upgrading to 3 and 4G, and affordable services and access for education, as now being provided in some provinces, need to be rolled out across the country.
Clearly, service providers won’t recover their investment, especially if lower rates are offered, unless usage expands substantially, with new services offered, which in turn requires that economic opportunities and activity also increase, which is a chicken and egg situation;
ELECTIONS, women’s seats and political participation: the progressive deterioration of electoral standards until 2017 needs to be reversed.
Various post-election recommendations need to be implemented to make the election process more transparent and democratic, with adequate preparation, accurate and accessible electoral roll, voter awareness, monitoring and deregistering and other penalties for abuse, prior to, during or after the election, without the task entirely being offloaded to the court of disputed returns.
Accurate voter registration or identification, authority and capacity of the Electoral Commission (preferably with three commissioners and independent verification) are all needed, and finally, as in other countries where women have been missing or disadvantaged in the legislature and executive, there needs to a proactive mechanism to counter the imbalance and to ensure their participation.
There may be inadequate time for major Constitutional reforms, but significant measures can still be made to ensure that PNG no longer is left in the disgraceful situation of being the only sizeable democracy without a women representative.
Bougainville has shown the country, something of what can be achieved at both the government and local council level; and,
DATA: PNG has the internet, computers and a relatively substantial public service in 2021, and yet much data, whether demographic, economic and trade or social, is less available, timely or available now than in the late 1970s/early 80s shortly after independence.
Efforts are being made, if slowly, to extend the integrated financial management system across the provinces, districts, government agencies, and some institutions have kept pace with the communications era, but timely, accurate and locally managed data are critical to planning and public resource management. The land and data management contracts by Government have resulted, as many road contracts, in appreciating contract prices, and deficient or lack of output, which goes back to the need for effective and transparent public procurement process and stakeholder participation.