Corruption in PNG: The Curse of the Rent Seekers

By Martyn Namorong

 

Landowners from Turubu protest at the Commission of Inquiry into Special Purpose Agriculture Business Leases held in Wewak last year

In trying to understand the roots of corruption in PNG, I have drawn upon my life long interaction with the resources sector in PNG. Having grown up in a logging camp in the Western Province, I appreciated the services provided to the local communities by the logging company. It was also at that logging camp in the 1990s that I came across a Tok Pisin translation of extracts from the Barnett Inquiry into the Forestry sector.

The Barnett Inquiry was aninvestigation in widespread corruption in the Forestry sector. Its revelations led to the changes to the Forestry laws and regulations and the introduction of log export monitoring by the Swiss firm SGS. I believe the unintended consequence of the tightening of Forestry regulations has been the recent land grab known as the granting of Special Purpose Agriculture Business Leases (SPABLs or SABLs).

Next Tuesday I will be presenting a paper on Corruption in PNG at the Australia National University in Canberra. My trip to Canberra is part of an awards package, for the work I did in reporting the findings of the Commission of Inquiry into the Sepik SPABLs. There I saw extensive logging and very little agriculture activity which led me to believe that land had been acquired under the pretext of agriculture in order to circumvent strict Forestry regulations brought about following the Barnett Inquiry.

If the Forest Authority was granting Forest Clearance Authorities (FCAs), for agroforestry, one would expect to see plantation agriculture crops mixed with plantation trees. This would by definition be called agroforestry. To my knowledge and based on what I observed, there was no evidence of agroforestry but rampant logging activity with token agriculture plots.

As I’ve moved on in life, I am now confronted with the opportunities and challenges brought about by the mining industry. And it is through my close association with the industry that I have come to appreciate the Curse of the Rent Seekers.

The mining industry is the main engine of growth in PNG in recent times providing about a third of the Governments budgetary support. But as observed by the anthropologist Dan Jorgensen, this was not what the Founding Fathers of PNG intended the nation to be. Jorgensen wrote:

“In attempting to reconcile generic notions of tradition with modernist hopes, the ideology of the Melanesian Way also grappled with one of the worries that preoccupied planners and politicians in the state’s early days, namely, the tension between egalitarian goals and the reality that development often produces inequality.”

If you wish to understand what type of nation PNG was meant to be, read the Somare Government’s Eight Point Plan of 1972 which was subsequently incorporated into the Constitution as the National Goals and Directive Principles. This Papua New Guinean model of development focused on small holder agriculture and small business owned by Papua New Guineans and was successfully implemented in the first decade of independence.

As long time PNG watcher, Professor Ronald Mays observed,

“During the first decade or so of independence, economic performance was generally satisfactory: although increases in real GDP were small (averaging 1.4 per cent over the period 1976- 1985) they were, except for one year, positive; there was a gradual diminishing of dependence on aid; and, under the government’s ‘hard kina’ strategy, economic management was sound.”

Jorgensen states that a World Bank Report in the 1970s laid the groundwork for the shift from this Papua New Guinean model of development to the current neo-liberal capitalist model in the 1980S.

To put things in a Global perspective, the neo-liberalists had overthrown Salvador Allende, the Socialist President of Chile on September 11 1971 (It is ironic that the head of neoliberalism would be decapitated 40 years later on September 11 2001). As the world, through Ronald Reagan and Margareth Thatcher, moved towards embracing Milton Friedman’s neo-liberal capitalism; PNG shifted from empowering local people through agriculture and small business towards facilitating the exploitation of natural resources by Multinational Corporations.

The shift in developmental policy as recommended by the World Bank meant that by the 1980s, PNG became increasingly dependent on revenue from extractive industries while other sectors declined, exposing the nation to shocks in the resources sector. When revenue from Panguna ceased as a result of the Bougainville crisis, the state could barely plug the holes in the budget despite the existence of Ok Tedi and the Kutubu Oil Fields.

Apart from the well-known conflicts and environmental concerns, issues of corruption have become widespread. In the early 1990s Barnett Inquiry into the Forestry sector highlighted many corrupt practices involving public officials and logging companies. Most recently, the O’Neill Government will be investigating the abuse of funds earmarked for landowners associated with Exxon Mobil’s LNG project and a recent report by the National Research Institute (NRI) has called for greater transparency in the disbursement of revenue from the Pogera Mine.

The best times in PNG’s history as an independent nation were between 1975 and 1985 as highlighted above by Professor May and this was when a Papua New Guinean model of development that focused on agriculture and small scale development activities was being implemented. Following the shift to the World Bank’s neo-liberal model of development conflicts and environmental issues have dogged the nation along with governance issues surrounding the distribution of wealth.

Between 2005 and 2010, mining and petroleum projects paid K12.7 billion to the government amounting to about a third of government revenue.

Despite the growth in income from resource rents there is widespread inequality as Sir Mekere Morauta highlighted in a speech made in 1996, 21 years after Independence;

“GDP has grown five times but the distribution of income is more skewed and less equitable than in 1975. Nominal per capita income has more than doubled, but 80 per cent of the population actually earn less than the 1975 average. Corruption, both petty and profound, permeates society today.”

Corruption, when viewed from the perspective of the World Bank’s neo-liberal model of development, is the distortion of the distribution of natural resource wealth in favour of a few Multinational Corporations and a powerful rent-seeking class. It is this misapplication of the wealth of a nation that I refer to as the Curse of the Rent Seekers. The excessive demands by so called resource owners and the kickbacks demanded by public officials are classic examples of such greed-driven rent seeking behaviour.

The World Bank has now backing the Extractive Industry Transparency Initiative (EITI) to address problems created by its prescribed model of development. But the EITI is just window-dressing by the World Bank as it does not address the fundamental issue of how those rents are distributed by the rent collectors.

I have tried to show the reader that the shift from the Papua New Guineanmodel of development to the World Bank’s neo-liberal model of development has created the problems that were foreseen by the Founding Fathers when they warned about the Darkness of Neon Lights in the Constitutional Planning Committee Report. It would be easy to say corruption concerns ethics, but let’s ask ourselves if the current model of development provides the conditions necessary for unethical behavior to thrive.

-ENDS-

Martyn Namorong is a multi-award winning writer currently on a two week study tour of Australia.