PNG must learn from Morauta reforms

The National Weekender
REFORM

By HENZY YAKHAM
ON December 19, 2020, Papua New Guinea’s sixth Prime Minister and economic guru, the late Sir Mekere Morauta passed on in Brisbane, Australia after battling cancer.
A fearless professional corruption fighter, Sir Mekere confronted graft issues head-on by moving from them back to the front burner setting the agenda for national conversation.
“Corruption and abuse have become systemic and systematic”, was his famous description that has become a common phrase today.
Sir Mekere was very critical about the “character of Papua New Guinea being changed profoundly” in recent times.
“The Papua New Guinea that Michael Somare, Julius Chan, Paias Wingti, Rabbie Namaliu and I helped shape has changed, and changed for the worse. Papua New Guineans do not like what they are witnessing and living with daily – they are uncertain about the future,” he repeated on numerous occasions.
Sir Mekere was a determined and disciplined person and that is how he conducted and managed PNG’s national affairs. He was widely respected in PNG and abroad for his commitment to probity and fiscal responsibility.
Sir Mekere’s vision was for PNG to develop, its leaders must be smart and strive to do things better and more efficiently. As well, his stance was that the Government’s primary duty must be to deliver basic services to the grassroots majority.
Currently, PNG is experiencing some of the most difficult socio-economic challenges due to global and locally born events and issues.
Similarly, in the two years after 1997 general election, PNG’s inflation rose from 4 to 22 per cent, interest on treasury bills shot from 9 to 28 per cent, foreign exchange reserves fell from US$535 million to US$89 million and the US$ exchange rate for the Kina plummeted from 71 to 28 cents.
On July 14, 1999, when Sir Mekere became Prime Minister that was what his Government inherited.
The statistics were not only grim, but they also told an important lesson, which was how fragile the economy was, and how quickly and easily it could be wrecked.
In the following months the Morauta Government embarked on a record of performance and reforms with revolutionary changes in political, financial, general election and superfund laws.
It had three underlying objects which were to:

  • Uphold the rule of law, strengthened and restore integrity of State institutions, create climate conducive for investment in State institutions, which are necessary for people’s personal security and prosperity.
  • Stabilise the Kina, to earn again its respect globally and to stop the rapid increase in prices. To support financial stabilisation, immediate initiatives were taken to re-establish productive relations with International Monetary

Fund (IMF), World Bank and Australian Government as well as normalising relations with PNG’s traditional sources of development finance. In September 1999, during the Apec Leaders’ meeting in Auckland New Zealand, Sir Mekere joined Prime Minister John Howard, President Bill Clinton, President Jiang Zemin, Japan’s PM Obuchi, Canada’s PM Chrétien, Malaysia’s PM Mahathir, Korea’s President Kim Dae Jung and the Indonesian President. There, Sir Mekere explained PNG’s new purpose, and invited their cooperation in PNG’s reconstruction and development.
l Restore stability to PNG national budget, to stop eating the seed, and to sow the seeds for future development. Most PNG governments have dissipated money and their administrative capacity by trying to do many things, and doing all of them badly. Sir Mekere’s government identified the most fertile seedbeds, made sure that they were well sown and the new plants nurtured.

Achievements of Morauta Government
The Morauta Government’s reforms were in five main areas, political, financial sector, economic, international relations and institutional strengthening and public sector. Public expenditure was also shifted to concentrate on free education and transport rehabilitation.

Political reform
Most notable political reform was the enactment of the Organic Law on Integrity of Political Parties and Candidates. This laid the basis for the growth of stronger political parties.
For the first time in PNG’s political history Sir Michael Somare’s Government after 2002 general election enjoyed a full five-year term.
This law set rules for proper administration of parties and for party discipline, preventing MPs from jumping from party to party. The law set rules on party financing and declaration of campaign funding and expenditure.
Major outcome of this reform is that today PNG enjoys political stability.

Limited Preferential Voting (LPV)
For the first time in 2007 general election MPs were elected by majority popular choice of voters in their electorates. Preferential voting is the best, more democratic and more representative than the previous first past the post voting system.
Before, some MPs got elected with only 5 per cent of the total vote. Today, candidates must receive 50 per cent + 1 votes to win. Experience of by-elections held since 2003 prove that LPV system has minimised election violence and abuse.
It is the best voting system the Mekere Government adopted for PNG.

Financial sector reforms
Deep reforms were instituted in the financial system including:

  • Saving former PNGBC from bankruptcy. If PNGBC had collapsed, the entire financial system would have been at risk;
  • Increasing BPNG independence in its role as regulator of the financial system and monetary policy conduct;
  • Giving BPNG more powers to ensure financial and administrative soundness of financial institutions and to outlaw fast money schemes;
  • Preventing BPNG by law from being a Government money-printing machine by setting a limit on amount of money Government could borrow from BPNG (K100 million);
  • Saving NPF from total collapse and setting up an inquiry to find out how workers’ savings had been stolen. After the inquiry NPF announced massive dividends for contributors;
  • Enacting new superannuation laws and made the superfund industry independent of government. Government representatives were removed from superfund boards and ministerial powers to approve investments removed;
  • Today, Superfunds reap the benefits of these reforms. In following years, industry assets have grown substantially;
  • In 1998-1999, Nasfund had losses of K176 million. In 2005 it achieved huge after-tax profit of K160 million and a more realistic but healthy figure of K70 million in 2006. The average annual return paid by Nasfund to members in the last 15 years was substantial. In 1999 Nasfund had debt of K154 million. By 2006 its assets were K906 million and membership grew from 56,000 to 90,000 and more today.
  • Performance of POSF and Defence Force Retirement Benefits Fund also improved dramatically when political manipulations were removed;
  • Former PNGBC was merged with BSP creating the foundation for a highly successful PNG-owned commercial bank;
  • In 2000 PNGBC made an operating loss of K41 million. BSP’s operating profit in 2006 was K165 million;
  • Critics of PNGBC sale often referred to it as “the people’s bank”. It was never the people’s bank – it was “leaders’ bank”. In 2000 when the BPNG stepped in to avert the collapse of PNGBC, provision was made for doubtful debts of K145 million. About 85 per cent of these bad loans were to politicians or their associates; and
  • BSP is now the “people’s bank”. Among top 20 shareholders are superfunds, landowner groups, and savings and loan societies. These organisations have up to 500,000 membership. With the Government, they own over 95 per cent of the bank.

Economic reforms
In 1999 PNG was collapsing.
Decision-making processes had weakened so badly that small interest groups were running the Government. Many important Cabinet submissions were prepared by outsiders with direct interest in the outcome, not by public servants;

Frequent changes of government or threats of change of government had led to policies and decisions being made primarily for political profit;

  • Key State institutions and agencies were floundering;
  • State enterprises faced bankruptcy, caused by political interference and corruption;
  • The economy was stagnant;
  • Public expenditure was out of control; and
  • Foreign exchange reserves had dwindled to less than one week’s general import cover and the Kina was faced inconvertibility.

Tax reforms
Despite adverse economic conditions between 1999 – 2002, Morauta Government instituted significant tax reforms.
A comprehensive review of PNG’s tax regime was undertaken in 2000 with nearly all the 115 recommendations were implemented:

  • Tax system was rationalised and simplified;
  • Incidence of personal tax was reduced to ease burden on low- and middle-income workers like the threshold at which people start to pay tax was increased from K4,000 to K6,500;
  • Fiscal regime for mining and petroleum was updated to make it internationally competitive, and fiscal stability guarantees were introduced for resource projects; and
  • Fiscal incentives for exploration and to prolong the mine life of existing projects were also introduced.

Ok Tedi Agreements
When BHP Billiton was leaving Ok Tedi mine, Sir Mekere saw this as an opportunity to establish a different model for local participation in resource projects, a model that emphasised the need to invest for growth and put aside money for future generations.
Morauta Government negotiated with BHP to give its 52% equity in Ok Tedi as a gift, in trust, to the people of PNG.
This was done through the establishment of the PNG Sustainable Development Programme, which was deliberately set up to protect it from political interference and from the sticky fingers of politicians.
PNGSDP has become a significant development partner and investor, funding large infrastructure projects, community projects and operating a successful micro-finance company, which provides credit to small business enterprises, to grassroots men, women and youths, people who would otherwise miss out on commercial bank loans.

Commercial Investments
A comprehensive system for “privatisation” was established, which involved restructuring the ownership of government service providers like Telikom, PNG Power, the water boards, Post PNG and PNG Ports through mergers, partial sale, outright sale, lease of assets or contract management to other parties with capital and expertise.
All the state-owned commercial authorities were suffering (and still today) from operational inefficiency, technically poor and politically compliant management, lack of capital and lack of capacity to deliver services.

Summary
Current politicians must learn from the Mekere Morauta experience in PNG’s national interest.
MPs must stop living a pretentious life and be honest in their course of duty and all conduct, both in public and private.
Politicians must learn to live by example and providing truly genuine service to those who entrusted them into positions of trust.
Service is defined as a means the occupation or function of serving and/or someone being employed as a servant (not in derogative sense) – especially for elected leaders.
This Christmas, we all should learn from the finest examples of leadership Jesus Christ persevered, preached and practised – examples of which are evidently well documented in the Bible.
Christ’s life story has changed the lives of hundreds of millions of people on Planet Earth like no prophets in the history of mankind.
The Christmas story should be related in the current PNG context of the poor, homeless, unemployed, neglected, denied, oppressed and even robbed citizens, either by design or default.
Simply, politicians’ first and foremost priority is the people they represent, not their new found friends after being elected in Port Moresby and elsewhere.
Merry Christmas and prosperous 2024.

  • Henzy Yakham is a freelance journalist and story ideas can be text messaged to 72159301.