No manager for ‘windfall revenues’: Uni academic

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THE much talked-about “windfall revenues” from the mineral sector will be wasted because there are no effective and proper mechanisms to manage them.
Australian National University academic Prof Ron Duncan said PNG had experienced two mining booms since Independence.
“The first in the early 1990s was poorly managed with Government expenditure greatly exceeding revenues, resulting in a large increase in public debt and the devaluation and eventual floating of the kina.
“The recent commodity boom has been managed more effectively, with the paying down of public debt and the setting aside of trust funds from the revenues for future expenditure on long-overdue refurbishment of important public infrastructure and development of essential services,” Prof Duncan said.
“Unfortunately, there was also a sharp increase in recurrent expenditure and there is now some doubt about how well the windfall revenues, set aside in trust funds, will be managed now and in the future.”
He told the PNG policy seminar at UPNG last Friday that whether setting aside of the windfall revenues in various trust funds was a good idea or not, it was still an ad hoc reaction to the receipt of the commodity boom revenues.
“It is certain that PNG will continue to experience commodity booms and slumps because of the high variability of global primary commodity prices.
“When the LNG project comes on line, the Government’s share of resource revenue flows and fluctuations will increase significantly.
“Therefore, it is important for PNG to have an indepth discussion about how future National Government resource revenues could be managed on a consistent and effective basis,” Prof Duncan said.
“Even when the Mineral Revenue Stabilisation Fund (MRSF) was intended to be used in this way, it never achieved any of its objectives.”
However, while good models have been developed to hold resource revenues like the Ok Tedi Development Foundation, it was important to note that the primary management problem has been in the effective expenditure of the resource revenues, he said, emphasising on the importance of differentiating between revenues held in trust and how to spend the money effectively.
Effective spending, Prof Duncan said, had been PNG’s biggest problem.
“Therefore, a major issue for discussion in PNG is whether institutional arrangements can be devised that would ensure that resource revenues collected by the Government in future would be spent more effectively.
“PNG has a desperate need to see the resource revenues go towards the development of its physical and human capital.
“However, if the past is any guide, one cannot be optimistic that Government expenditure of these revenues will deliver the desired results,” Prof Duncan said.