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PNG’s Challenges and Opportunities – 100 Day Plan

PNG’s new government is proposing a 100 day plan. What should this consider?

A good plan begins by fully understanding the challenges and opportunities facing its people.

This understanding is improved by seeing how one is going relative to neighbours (comparative public policy analysis).

The list below from the ADB highlights that PNG still faces massive development challenges. It is saddening to see PNG’s poor rankings. PNG’s politicians have been failing their people.

On opportunities, PNG leads the world in key areas such as its cultural richness (1st), the extent of its tropical forests (3rd for the entire island), and its extraordinary biodiversity (PNG is one of 17 megadiverse countries in the world).

In terms of mineral and petroleum wealth, it actually does fairly poorly – even in LNG its ranks 47th and petroleum 62nd (details below).

In going forward, PNG needs to change its self-image of “mountains of gold in seas of oil”. This myth (at least in world terms) has delivered appalling development outcomes for PNG – see here and here . There are much better development paths.

A better self-image would be “mountains of culture in rich seas of diversity” – or something similar.  (Suggestions would be welcome – but about people not minerals).

I hope the 100 day plan takes a much more people-orientated approach to PNG’s development. This is a key lesson from its failed economic development to date.  May PNG’s new politicians do much better.

Details

Challenges

The best comparative database source for PNG’s development progress, focused around internationally agreed sustainable development goals, is the ADB Basic Statistics publication – most recently updated in April 2017 – see here.

45 countries in the Asia-Pacific are included. For some indicators, information is not collected for every country. The following list provides some key comparative information – and it generally makes for some pretty sad reading:

  • In PNG, an estimated 39.3% of the population live below the $US1.90 per day poverty line in 2014. This is by far the lowest of the 26 countries with information (the next lowest is 21.2% in India).
  • The prevalence of stunting amount children under the age of 5 is 49.5%, ranking 29th of the 30 countries with only Timor-Leste having a slightly higher figure of 50.2%.
  • The prevalence of malnutrition (wasting) among children under 5 is 14.3%, the highest rate for the 30 countries.
  • The prevalence of malnutrition (overweight) among children under 5 is 13.8%, the 4th highest rate for the 30 countries.
  • The maternal mortality ratio per 100,000 live births is 215, the equal 3rd highest of 40 countries with information.
  • The under 5 mortality rate per 1,000 live births is 57, the 4th highest of 43 countries.
  • The number of new HIV aids infections in 2015 is 0.36 per 1,000 of the uninfected population, the highest of 21 countries.
  • The tuberculosis incidence per 100,000 population is 432, the 2nd highest of 44 countries.
  • The incidence of malaria per 1,000 population is 185, nearly double the next highest country of 90 in Timor Leste.
  • The death rate due to road traffic injuries per 100,000 of the population is 16.8, 18th of 44 countries.
  • The Mortality Rate Attributed to Household and Ambient Air Pollution per 100,000 population is 46.3, 32nd of 43 countries.
  • The Mortality Rate Attributed to Unsafe Water, Unsafe Sanitation, and Lack of Hygiene is 12.4, 7th of 40 countries.
  • The Proportion of Population Using Improved Drinking Water Sources is 40%, by far the lowest of the 43 countries (the next highest rate is Afghanistan with 55.3%)
  • The Proportion of Population Using Improved Sanitation Facilities is 18.9%, significantly below the next lowest ranking country of Afghanistan with 31.9%.
  • The proportion of the population with access to electricity is 20.3%, once again significantly below the next lowest ranking country of Vanuatu with 34.5%. Interestingly in the energy context, renewable energy represents 50% of energy consumption, the 7th highest share of 41 countries.

Opportunities

PNG also has great opportunities.

PNG’s population of 8.48 million culturally diverse people is its greatest asset. PNG’s population is 21st largest of the 45 countries in the Asia-Pacific region.

More significantly, PNG unambiguously leads the world with the rich cultural diverseness of this population. With 840 distinct language and cultural  groupings, PNG has an extraordinary resource in a globalising world.

Surely there are people smart enough in PNG to tap into this world leading resource both as an export market as well as a tourist destination. The latest display of PNG’s cultures being translated into gorgeous fashions (PNG’s Fashion Week is underway ) is a small example of this potential. The actual volume of exports might not be as large as an LNG project, but most LNG revenues go to overseas bankers and investors anyway.

PNG’s land mass is 464 million square kilometres – the 11th largest in the region and larger than other countries such as Vietnam, Malaysia and the Philippines – and more than four times larger than countries such as South Korea.

PNG also has considerable mineral and oil resources, but these are usually over-stated in terms of world importance.  There is a well-known expression in PNG of it being a country with “mountains of gold in seas of oil”. However, in terms of world reserves, PNG is actually not that wealthy relative to others. For example, PNG’s natural gas reserves, the source of the PNG LNG boom and the prospective Papua LNG project are estimated in 2016 to be 151.3 billion cubic meters, ranking 47th in the world. In oil, PNG’s 200 million BBL of reserves ranks 62nd in the world (The World Factbook – the CIA should know).

Contrast that with its extraordinary wealth when it comes to forests and biodiversity. After the Amazon and Congo, the island of New Guinea is the third largest rainforest in the world. These forests face threats from logging, mining, wildlife trade and agricultural plantations, particularly palm oil. These forest resources are being exploited with very poor returns to local communities. And most in PNG know the power behind why the SABLs where never examined under the last government (and won’t be under this one).

And PNG is honoured by being one of only 17 megadiverse countries in the world.

The business acumen of PNG’s people is frequently commented upon. However, PNG does not create a particularly friendly environment for building up these business skills – the graph below shows how far PNG is behind most other countries in the region. Much still needs to be done in this area – and proposed policies in areas such as SMEs, agriculture and land will undermine this enormous resource.

Conclusion

When looking over the last 42 years of PNG’s development since independence, there has been too much emphasis on a resource focus for development rather than a people focus.

But the facts above indicates that PNG’s mineral and petroleum wealth are actually quite modest. PNG’s real opportunities lie in other areas.  PNG of course needs to continue to use its natural resources – hopefully on better terms than in the past. But the real way forward is looking at new opportunities with greater potential for women, the rural poor and small businesses.

Let’s hope the 100 day plan does a better job that the Alotau II Accord (see here for a critique) in actually focusing on the development of the PNG people.

May PNG change its image from “mountains of gold in seas of oil” to something of greater benefit such as “mountains of culture in rich seas of diversity”. There is still lots of money, as well as better social development outcomes, in a new motto which re-focuses PNG’s development effort.

 

Alotau II Accord – insulting most in PNG

Alotau II (see here) fails as a vision for PNG’s future. It insults women, the rural poor, and business credibility.

It insults the majority of PNG’s population by placing women’s economic empowerment as only the 89th item of its list of 90 priorities – and it does so under the heading of “PNG Immigration and Customs Services”. It makes no mention at all of women’s social empowerment – so taking action to address issues such as domestic violence and killing “witches”.  And there is also no mention of women’s political empowerment. PNG’s 111 member all male parliament will have to do better.

It insults the majority of PNG’s population by having no path forward for agriculture, the source of livelihood for over 80 per cent of its population. Mentioning e-agriculture (priority 80), and only talking about reviving plantations (priority 15) is no way to deal with the malnutrition and stunting still facing too many in PNG. Much can be done to improve the productivity as well as drought and frost resistance of PNG’s subsistence crops. And there are many more agricultural export opportunities into the growing markets of the Indo-Pacific (see recent coverage of vanilla beans). PNG is missing the key opportunities of linking with the rapidly growing markets of the Indo-Pacific region.

It insults the intelligence of the local business community and international investors by having its 6th priority as “Establish a gold bullion bank to address exchange rate shortages”. Gold-miners in the country beware! This is a very scary – even looney – idea which will undermine confidence. And a “bullion bank” will not address foreign exchange shortages – at best it will make the excess (trapped) liquidity in PNG’s economy even worse.

And “revenue-led growth” as priority 4?!  A tax is a tax and generally harms growth.  Of course I understand that increased revenues are necessary to deal with current fiscal mismanagement and to fund key areas of expenditure but it is a worrisome mindset to portray tax increases as leading a growth path.

There is no clear political or economic philosophy for meetings its claimed objectives of more inclusive growth.  There are no assurances that the anti-growth, anti-business elements in planned policies such as agriculture, SMEs and land will be dropped. There is no mention of private-public partnerships. There is a worrying amount of state-based action in the accord and very little about facilitating the private sector with pro-market policies.

The best element of this document is placing the National Population Policy as the first objective. PNG needs to do more to deal with this challenge.  However, research indicates the best ways to achieve this “demographic transition” is through women’s empowerment – and a key element of this will be in the agriculture sector. So the objective is good, but Alotau II undermines the two key ways for making progress.

Commendably, there is more emphasis on improving the quality of education – arguably a lesson learnt by the government.

However, on the continuing spurious “free health” policy claims, the government continues to deceive itself that K20m delivers on such a program, yet alone whether it can both afford and administratively implement a true “free health” program. A decision to revise the medical supply contract awarded during the election campaign by the former Health Minister would have been a much more believable and appropriate objective.

PNG’s infrastructure budget has been slashed by the government. The Transport budget has been cut from K1,481m in 2015 to K897m in 2017 – a real cut of 52% after allowing for inflation – see here.  And major future cuts of around another 30% were foreshadowed in the 2017 budget (and that was before the most recent deficit blow-out). How is it credible to have such a long list of infrastructure activities in the Alotau II accord when the budget outlook (according to PNG Treasury) is so constrained?

There are very interesting references to changes in the federal structure of PNG. The proposed 60/30/10 central/provincial/landowners split in mining revenues (does this also include petroleum/gas?) would be a major change. Was this  the element that had Sir Julius Chan join the government – a way forward for much greater autonomy for New Ireland with its rich Newcrest mine? And also of interest for the 2019 Bougainville independence referendum.

The failure of the Accord to consider adequately women’s empowerment is also a sad indictment of the effectiveness of Australia’s aid program. This is a key priority for Australia reflecting the very strong and commendable views of Foreign Minister Julie Bishop.  Some in the Australian High Commission in Port Moresby will be trying to explain the manifest lack of real influence the aid program is having in the area of women’s empowerment (and simply saying it wasn’t mentioned in Alotau I is a poor glory claim as at least the latter mentioned issues such as maternal mortality). Of course there have been many programs, but ultimately the real policy test for evaluating the effectiveness of Australia’s gender programs rests on whether  it gets an adequate profile in the new government’s most important political document? On women’s empowerment, clearly the answer is “No!”.

It is interesting to read a compare Alotau II with Alotau I (see here for the latter – pdf).  Frankly, Alotau I is a better document.  Still clearly aspirational and wanting to do too much but at least there were time-frames and more holistic approaches. There is more recognition of economic challenges in Alotau II, but no sense the implications of these have been understood.

May the 100 Day plan promised by Charles Abel have a more credible approach to dealing with PNG’s considerable challenges.  I will provide a snapshot of these challenges (and how PNG ranks relative to its neighbours) in the next article. And then an outline of two very different development paths facing PNG.

O’Neill’s economic mismanagement continues – an extra K4.3bn in public debt, and budget deficit blow-out of over one billion Kina – PNG Treasury

The PNG Treasury released the 2017 Mid Year Economic and Fiscal Outlook (MYEFO) last night (31 July)- see here.

This is an extraordinary document .  Amongst the detail is a damning insight into O’Neill’s continuing mismanagement of the budget. There is little doubt that the original 2017 budget was fiscally fraudulent (see here and here).

The PNG Treasury document indicates, in summary:

  • The budget deficit is over K1 billion larger than forecast only 7 months ago.  The PNG Treasury document states the deficit has increased from K1,9bn to K2.8bn.
    • This will continue the pattern of the O’Neill government having consistently the largest budget deficits of any government in PNG’s history – see here.
    • And the actual deficit forecast is actually over K3bn when including the blowout in interest costs for all the public debt from K1.3bn to K1.5bn. This is the 3rd highest item of government expenditure – a fact hidden by O’Neill when describing the budget during the election campaign (see here).
  • Interest costs have jumped because public debt has exploded from an estimate of 2017 debt of  K21,623m to K25,939.4m.
    • An extra K4,316.1m in debt – all within the 2017 forecast.
    • Any head of a household would be sacked for getting the figures so wrong – the fall in commodity prices occurred back in 2014/15 – why are the 2017 figures so wrong?
  • The debt to GDP ratio for 2017 blows out from 29% to 34.5%.

In the words of the PNG Treasury (p 30 of the PNG Treasury document), “One measure of debt sustainability is the debt to GDP ratio. According to the FRA [Fiscal Responsibility Act], the debt ratio limit is 30.0 per cent of GDP.  The updated MYEFO estimate is projected to be 34.9 per cent of GDP, which is 4.9 percentage points above the legislated limit.”

Major expenditure cuts are foreshadowed in a Supplementary Budget – “In the likely event that revenue falls, a reduction in expenditure through a Supplementary Budget is required of the Government to keep debt within legal limits and consistent with the MTDS [Medium-Term Debt Strategy]” p30.

Some of O’Neill’s promises during the election campaign are extraordinarily expensive, and these would make the outcomes even worse.

In an extremely worrying comment, with no details provided, the PNG Treasury states “Also captured in the Total Public Debt Stock Outstanding are the State-guaranteed loans now being serviced by the State.” (p29).

As the deficit is some K1.1bn higher, and the total increase in public debt is K4.3bn higher, the difference of K3.2bn is probably the costs of the Oil Search share purchase debacle. These costs are now being carried by all PNG taxpayers and not Kumul.  That was a shocking deal for the people of PNG -and its legality has still not been tested in the courts (although one Treasurer was sacked over the issue).

The growth forecast falls slightly – it is now indicating on per capita terms, the PNG economy will go backwards by 0.4% in 2017.  For too long, PNG’s economic performance has gone backwards – see here and here.

Conclusion

Overall, this is an extraordinarily frank document. My credit to the brave PNG Treasury authors. Still, it is written by professional public servants, so the punches have been pulled.

But between the lines, the only conclusion is one of extraordinary economic mismanagement.

It is a shame there was not more time for new members of Parliament to reflect on the document before the scheduled vote on PNG’s new Prime Minister – especially given the nature of a “closed” camp.  The 2017 budget was indeed fraudulent.

O’Neill has a track record that gives him an “E” for economic management.  That is a sad legacy for PNG’s future generations.

Hopefully, a new government can start the process of economic repair.

Gamato’s failed ghost-busting defence

The Electoral Commissioner on Friday 21 issued a press release responding to claims about the 2017 voter roll.

He misrepresents seriously what my earlier analysis showed. What is more intriguing is that he seriously misrepresents what he himself has tried to show – he has scored some home goals.

First, on the ludicrous claim that one cannot compare the 2017 electoral roll with the 2011 census (claiming that they are apples and oranges), he made this same comparison on 9 April – “This (new electoral enrolment forms) may reach one million and over and may contribute to a highly inflated 2017 roll as the number of eligible voters on the roll may equal or exceed the PNG population figure which is 7.5 million as per the 2011 census figures.” see here and here. So why can he make the comparison but not others?

Second, doing a check on the ratio of the electoral roll to the expected voting age population is a very standard and fundamental check on roll integrity. This comparison used in assessing electoral fairness throughout the world – including in PNG.  For example, in the DFAT assessment of its assistance to the PNG Electoral Commission from 2002 to 2012 – see here – it constantly uses the ratio of the roll to the population as the basis for assessing the quality of the electoral roll and Australia’s previous assistance in this area (see paras 3.9, 4.14, 4.16, 4.19, 4.29, 4.32, 4.34).

Third, he then indicates that I was trying to do a comparison between the quality of the 2012 electoral roll and the 2017 roll.  I would have liked to have done this comparison, but the Electoral Commission had not previously released the data which allowed a test of a bias towards PNC electorates.  So all I had previously been able to do was an examination of the 2017 roll.  And all indications are that it is incredibly biased towards the PNC – see here and here.  The Electoral Commissioner should unquestionable release more information to the public – doing so what have helped stop the devastating blow to PNG’s election credibility when the Electoral Advisory Committee felt it had to resign as it wasn’t provided with such information.

Fourth, an unintended outcome of providing additional information is that a very broad comparison can now be made between electoral bias in the 2012 and 2017 electoral rolls.  Gamato has shot himself in the foot.

Although there is a commendable reduction in the total number of “excess” electors, or inflated rolls, or “ghost voters” on the roll,  the reduction has been concentrated in non-PNC areas. So while it is commendable that the average size of ghost voters has fallen from 7,500 per PNC electorate to 6,000 per electorate, it is extraordinary that the reduction in non-PNC areas has been so much greater (from around 4,000 per electorate to under 500 – and a negative number when statistical outliers excluded).

This ghost-busting effort is 23% for PNC areas – a pretty poor effort.  However, it is 89% for non-PNC areas – in some ways a noteworthy achievement. Details provided in tables below, and summarised in the following graph.  This is a very biased pattern of “ghost-busting” which helps O’Neill’s position.

If you were looking to get rid of a lot more “ghosts” in non-government electorates, it seems as if you know who you’d want to call.

Gamota should resign.  It is difficult to know how this can be handled in the current situation where he has so much power to shape the election’s outcome.

Despite all the abuse of the powers of incumbency by O’Neill, he appears to have underestimated the strength of the people’s desire for change.

May there be a unified front from those seeking a change, one needed to deal with the corruption, poor governance and disappointing economic and budgetary and exchange rate performance of the last five years.

 

 

 

Extract from 21 July Press Release from PNG Electoral Commission

 

4. Response to claims by Blogger Paul Flanagan about 2017 Voter Roll

At my last briefing, questions were raised by an article by a blogger Paul Flanagan.

 

We have looked into this. Mr Flanagan made comparisons between the 2017 voter roll and the 2011 census.

 

His claim is that the number of people on the 2017 voter roll in seats held by the PNC increased by a higher percentage than non-PNC seats.

 

But he was comparing the 2017 roll and the 2011 census. His argument is based on a false comparison.

 

The Electoral Commission has nothing to do with the 2011 census. We do not compile the census.

 

Furthermore, Electoral Roll and Census use a different methodology and have different requirements.

 

Therefore the comparison is not valid. He is comparing apples to oranges.

There is no ‘army of ghost voters’ as Mr Flanagan claims.

 

The Electoral Commission is concerned with the electoral roll. The overall growth in the roll from 2012 to 2017 was 7%, or 318,000 people.

 

For someone to claim there are 300,000 ‘ghost voters’ for one political coalition is nonsensical. It simply cannot be substantiated.

 

Between the 2012 roll and the 2017 roll, the increase in numbers in PNC and non-PNC seats is in fact marginally lower in non-PNC seats – by 1.1%.

 

In PNC held seats there was growth of 5.9%, and in non-PNC seats growth of 7% in numbers on the roll.

 

If we use Mr Flanagan’s comparison of 49 PNC and PNC-endorsed seats to 40 non-PNC seats, the growth figures are 7.9% and 5.2% respectively.

 

But I would point out that most PNC-endorsed seats are in the Highlands.

There was bigger than average roll growth across the board, in seats won by all parties.

 

Let me be clear: the Election Commission is an independent Constitutional Office. We do not work for the PNC or any other political party. I resent that inference and reject it outright and completely.

 

As I have said previously, there have been concerns with the voter roll. It is not perfect, and we are looking into it. We will conduct a full review. But such problems are not unique to the 2017 election.

 

The sheer logistical feats of staging an election here must not be ignored. We are a country of about 7.6-8 million people, with more than 800 different languages, high rates of illiteracy, poor infrastructure, areas without road access.

 

In parts of the country like the Highlands, there is a robust culture that adds its own complications to holding elections.

 

Papua New Guinea faces multiple challenges in staging an election.

 

We are not perfect, but we are making progress.

 

The Election Commission is committed to improvement, while at times operating with resources which were below expectations.

 

 

PNG’s biased election – O’Neill and Gamato’s shame

PNG’s election has unquestionably been biased in favour of the O’Neill government. The army of 300,000 PNC ghost voters, over 6,000 for every PNC electorate on average,  is almost a statistical certainty – a level of gross manipulation that even surprised me.

My last article indicated some extraordinary differences in the numbers of “ghost voters” (or “excess electors”, or “inflated rolls”) when comparing PNC electorates to non-PNC electorates. These were using simple statistical tools – totals and averages. This article provides more detailed statistical analysis of the likely pattern of bias.

These detailed statistical regressions (done by an independent expert) indicate a higher than 95% probability (so 19 chances in 20 – pretty high odds!) that the election has been biased in favour of the PNC.

That figure is 99% when 5 statistical outliers are removed (so 99 chances in 100 – extraordinary odds).

This is an extraordinary pattern of bias – one rarely found in statistical analysis in the social sciences.

When determining statistical relationships, sometimes “statistical outliers” are identified. Five were identified by the model.  This article includes figures both including and excluding these “outliers” – see summary table below.

The following graph is based on excluding the 5 outliers – so on the remaining 84 electorates. It shows that the O’Neill PNC electorates had on average 6,349 ghost voters. Non-PNC electorates had a negative number of 621 – people would turn up to vote and find their names were not on the roll.  Some of this is accidental or chaotic, but the statistical analysis indicates much of this is most likely deliberate – 99% most likely!

There will be many tricks ahead as the O’Neill government continues to play the advantages of incumbency (such as delayed counting and claims of failed elections in key areas where Morauta and Polye had strong claims).

Gamato needs to take responsibility for this biased election and resign.

The public has a right to know what actually happened to the 2017 electoral roll, the reasons for the chaotic distribution of ballots with inadequate numbers going to key anti-O’Neill areas (such as the universities), the very suspicious pattern of slow counting in potentially key alternative government strongholds, the reasons he has started to hide from the press and why he attacks commentators for simply using the same comparison he used on 9 April or figures he’s earlier distributed.

The Election Advisory Committee should reform and advise the Governor General, notwithstanding the limits on their power, which electorates should be declared failed. Ialibu-Pangia and Tari would seem prime suspects for being declared failed with unacceptable last minute gerrymandering and statistically improbable voter turnout figures.

My next blog will deal with the ludicrous attempt by Gamato to defend his biased practices in his Press Release on Friday.

Fortunately, the public backlash against PNC is so powerful that despite the clear bias in this election, there still remains a historic chance for change.

May the anti-O’Neill forces be able to find enough common ground to form a new government.

Details

Statistical analysis confirms PNC’s army of around 300,000 ghost voters.

Regression analysis for the 89 electorates, with 49 PNC members standing for re-election, indicates a 95% probability that there is a bias in favour of the PNC (see results above and below).

The statistical analysis (by an outside expert) is set out in response to three questions -key figures are the P values – note descriptions of some PNC electorates have been updated since the earlier analysis based on the PNGEC nomination forms by party rather than the PNG Parliamentary website).

In determining relationships, statistical models can indicate “outliers” which are often excluded for the purposes of analysis. This model identifies 5 electorates as “outliers”.  Excluding these, the probability of electoral bias in favour of the PNC climbs to an extraordinary 99%.

In the social sciences, yet alone medical science or other areas, it is extremely rare to get such a powerful relationship. Possibly there is some extraordinary explanation for why there is only 1 chance in a 100 that the 2017 election was not rigged.  Releasing more information to the public at the LLG and Ward levels would allow more detailed analysis and greater certainty.

I had expected the devil to be in the detail – see here – but the manipulation appears to have been so extensive and clear that the bias shows up in even very aggregrated data. This is a shameful situation.

The Electoral Commissioner should take responsibility for this failure of the electoral roll – it was his job to get rid of “ghosts”. If that was too much to hope for, at least he should have had the ghosts evenly spread.

 

PNG’s Electoral Bias Indicators –PNC’s near 300,000 Ghost Voters and Mathematical Impossibilities

Summary

Statistical indicators suggest the O’Neill government has used its power of incumbency to ‘cook the books’ in its favour. Comparing the 2017 electoral roll with population estimates by electorate based on the 2011 census, the Electoral Commission has created nearly 300,000 “ghost voters” in PNC controlled electorates.  This is 5,682 “ghost voters” for every PNC sitting member. This is over 10 times the number of “ghost voters” for non-PNC sitting members. PNC members are also being declared elected based on “mathematical impossibilities”.

PNG’s vibrant democracy, including its extraordinary diversity and combination of individual choice and clan loyalties, may still be able to overcome such electoral bias in favour of O’Neill. This may depend on the Biblical and moral choices about to be made by new Independent members. May they choose wisely and morally, not just chasing the money politics of the PNC and its likely manipulation of the election, when they decide on PNG’s new government.

PNC’s army of “Ghost voters”

One extraordinary indicator of electoral bias is that O’Neill PNC supported electorates had, on average, an “extra” 5,682 people on the electoral roll relative to their population. The number of these “Ghost voters” is over ten times larger than the average of 507 for non-PNC electorates (details, including methodology, below).

Overall, there were nearly 300,000 more people on the electoral roll in PNC electorates than the latest population census would suggest. This is much greater than the extra 20,000 in non-PNC electorates.

It seems the cleansing of the 2017 electoral roll, assisted by Australia, was able to find nearly all the “ghost” electors in non-government seats, but failed abysmally in seats held by the government.

This is also a very sad comment on the quality of Electoral Commissioner’s management of the election. Combined with his failure to maintain the confidence of the independent Electoral Advisory Committee, he should resign and give power to a more independent body.

This type of electoral bias has provided nearly 300,000 extra votes available to government electorates.

But what does this mean in practical terms?

At the margin, this type of electoral bias made it more likely that your name would be on the roll if you turned up in an electorate controlled by the government. Many PNG citizens were disenfranchised by not having their name on the roll. For non-PNC electorates, if we exclude the statistical outlier of the electorate of Obura-Wonenara (which had a very , very unlikely figure of the census being only one-quarter of the electoral roll – nearly double the outlier of any other electorate), all other non-PNC electorates had on average 864 less names on the electoral roll than suggested by the latest census.

And the extensively reported “double voting” is easier to do when there are more names on the roll.  And easier to sneak in a few extra pre-filled ballot boxes with your preferred candidate.

But the key issue here is how these “extra votes” are actually distributed at the sub-electorate level – so by LLG, Ward and even by polling station.  The story of the Simbu election scrutineers (see here ) indicates the type of manipulations that are easier to do in electorates where the PNC members have many more “ghost voters”. As argued here, the devil is generally in the detail (apart from apparently crude stuff-ups such as the Marape vote – see below).

We know that due to clan loyalty, and views of leadership, some seats will comfortably go to particular people and parties – O’Neill, Basil etc. Marape’s re-election was expected, so it is hard to figure out why there would be manipulation (unless it was targeted as an early count, early declared victory to give a head-start to the vital government coalition formation process).

In the 89 open electorates (so not the 22 electorates based on electing a Governor for the Province who then sits in the 111 member Parliament), the average first preference vote was 8,500 – only 20% of all votes cast. If you had the most first preference votes, you then generally won the election– three-quarters of all elected members won their first preference count (see here).

So by adding even an extra thousand or two thousand possible votes in areas where candidates had particularly strong support, you could gain an extra few percent which can be vital for overall success.  An average of 5,682 “ghost voters” provides enormous flexibility to manipulate the election.

Of course, there is an extraordinary amount of diversity and noise in the election. This type of game will not necessarily overcome other issues which possibly reduce popularity. They do not account for major election promises that are particularly beneficial to certain electorates (such as the Prime Minister’s K3.5 billion give away of a substantial share of its ownership of the PNG LNG project to landowners in Hela and other areas around the project – why wouldn’t you vote for the PNC with this massive handout even if it destroys your budget credibility and issues of equity across all of PNG?). There are many things that cannot be tested by some form of mathematical analysis to determine systematic bias – the courts can go into much more detail, such as whether voters are allowed to vote on Sundays and forms of intimidation in certain areas.

There are even more rigorous statistical tools available to inform an understanding of the electoral bias already very evident in this election. This would require more detailed information, as there is even more devil in the detail. It is a shame that the Electoral Commission is hiding more detailed information that would inform good public policy.  It is understandable that the Electoral Advisory Committee resigned as it wasn’t getting this type of detailed information.  However, possibly there is enough public information to inform their advice that there is a systemic bias towards the O’Neill PNC, and that some electorates have “mathematically impossible” outcomes.

Mathematical Impossibilities

Some “mathematical impossibility” bias indicators are crude but damning.

  • For example, there has been no explanation provided for how the first “elected” member – the Hon. James Marape Minister for Finance – won in an electorate where there were between 7,000 and 20,000 more votes cast than there were names on the electoral roll, or shown in the latest population census.
  • The “gerrymander” to shift 13 Wards this electorate accounts for possibly 9 to 12 thousand of the difference, but there still remains a huge gap of over 7,000 extra votes.
  • This is the type of bias it would have been good for the Electoral Advisory Committee to examine, and if there remained major issues of “mathematical impossibility”, recommended that the election in that electorate should be re-run.
  • As a general rule, unless some clear explanation can be provided, an election should be re-run if the number of votes cast exceed the number of people on the electoral roll or based on the latest census.

Next Steps

As the election count continues, a key third stage of the four stage election process (see EAC comments) there is still a great need for integrity from officials, scrutineers and police. There are still key decisions ahead for the Electoral Commissioner and even the Governor General. These decisions would be better informed if there was greater information sharing – this could help confirm the legitimacy of the election.  Looking ahead, such analysis can also provide some benchmarks for hopefully making the 2022 election a much better and fairer election for whatever government emerges from this election.

There is also a key stage for government coalition formation.  As expected, no party will win an absolute majority. There is a clear coalition of parties that are anti-O’Neill, including former coalition partner National Alliance headed by the former Treasurer (who was sacked in part for exposing other budgetary games played by the O’Neill government on the debt to GDP ratio and economic growth – the type of games indicating a willingness for the O’Neill government to play games with the electoral numbers).

These independent members will have a key role in shaping PNG’s future. Hopefully, they will reflect on the legitimacy of many PNC members who have been given an unfair head-start. Early choices by the “Independent” member for Koroba/ Lake Kopiago, Hon. Petrus Nane Thomas to immediately join PNC without time for considering alternatives is a disappointing start. May other Independent candidates be guided by the Bible and their moral vision to decide whether such deliberate bias should be rewarded with the right to rule.

Detail

The analysis for this blog is based on the distributed version of the 2017 electoral roll, the 2011 Population Census (updated by 16.5% for population increases since then – 5 years at a compounding annual growth rate of 3.1%), the ANU Electoral Database and information on who were actually PNC endorsed sitting members of parliament (this was based on the PNG Parliament website, except for 4 members whose party endorsement differed from the Parliamentary website eg Potape who was PNC in the parliament but not endorsed as the PNC candidate).

The excel tables providing all this information at the electorate level is available by emailing admin@pngeconomics.org. A summary of the totals and averages are set out in the following table –

This analysis has taken some time to put together.  Over coming days, I will apply more detailed statistical tests to examine patters of electoral bias based on publicly available information.  This analysis would be greatly assisted by more detailed information – the type of information that should be publicly available such as the number of actual ballot papers distributed by polling station.  This is the type of information that was not even provided to the PNG Constitutional Electoral Advisory Committee.  Unfortunately, I suspect that public policy analysis on the true level of possible fraud in this election will be buried by government authorities refusing to provide detailed information.

 

 

PNG’s failing election – the devil is in the hidden detail

Summary

The resignation of PNG’s Election Advisory Committee is a devastating blow to the credibility of PNG’s 2017 election.

The failure to provide this high level constitutional Committee with factual electoral information suggests deliberate acts to hide the truth (the EAC is a constitutional committee with the Chief Ombudsman, representative of Transparency International, and  a law lecturer from the University of PNG).

In its resignation letter, the committee indicates it was “prevented from performing its constitutional duties and roles” because it has not been provided with “baseline data and information nor have we been party to regular reporting”.

Detailed information is required to unpack possible deliberate ‘cooking the books’ from the general chaos and mismanagement of PNG’s 2017 election.

At an aggregate level, initial statistical analysis indicates that no clear pattern of bias can be determined at an electorate by electorate level (see below).

However, the devil is in the detail. The analysis needs to be done at the Ward or even polling station level to determine if there is systematic bias. And this type of information appears to be hidden from the Electoral Assistance Commission and the people of PNG more broadly.

Without such information, it is difficult to understand how the international observers to the election can form a view on whether it has been a free and fair election.

Denying even a thousand votes to even one area by failing to distribute enough ballot papers or omitting a substantial number of previous electors from the electoral roll, yet alone organising to stack a ballot box or steal one, can easily swing the outcome. And it is this type of information which has been denied to the Electoral Assistance Commission.

Australia must take some responsibility for this mess. Protecting a democracy so close to our shores (PNG is less than 10km from Australia) should have been a much higher priority than supporting the planned APEC meeting in 2018, yet alone the funding provided to the Manus asylum seeker centre.

The next steps in this saga are very uncertain. Six electorates were considered “failed” in the 2002 election, but over one hundred electorates were considered fair and a new government was formed.  Concerns appear much more widespread in this election although it has been more peaceful than some earlier ones.  The resignation of the EAC removes yet another important check on the fairness of the election. ‘Following careful deliberation the members of the Electoral Advisory Commission wish to advise that it is unable to undertake one of its primary functions and which is to “consider and recommend failure of an election”’.

Maybe it is not too late to save this election. Actions by returning officers, scrutineers, police and Electoral Commission officers can still have important impacts in helping protect the remaining integrity of this poll. The Electoral Commissioner should resign. The influential role of recommending the outcome of the writs to the Governor General should be moved to someone seen as more independent of the O’Neill government and the mismanagement of the election. Possibly the independent EAC itself should be asked to perform these key high level roles with the administrative functions going to the deputy EC. Alternatives such as a year of chaos preparing for yet another election or actions by the armed forces are not at all appealing.

Details

The Electoral Assistance Commission resigned last night (9 July) covered on EMTV and with a public press release.

The three-member Election Advisory Committee who are appointed by the Governor General comprise of the Chief Ombudsman Commissioner (or his nominee) and two other persons – a nominee by the board of Transparency International (PNG) Incorporated and a retired judge or lawyer qualified to be appointed a judge nominated by PNGEC after consultations with the Chief Ombudsman and TIPNG.  Details of the EAC’s role are covered in this report here.

Functions of the Election Advisory Committee were activated from the issue of writs on April 20, 2017 and will end upon the return of writs on July 24, 2017.

Electorate by electorate information is available for 2017, 2012 and the 2011 population census.  Early statistical information at the electorate level indicates that on average, the ratio between the number of votes cast in the 2012 election (3.6 million in total), and the number of names on the 2017 electoral roll (just over 5 million in total) was 1.38.  Similarly, the ratio between the numbers of people in a particular electorate in the 2011 population census (3.9 million), and the number of people on the 2017 electoral roll, was on average 1.23.  With a 3.1% annual population growth rate, the expectation was this ratio would be slightly lower at around 1.17.  However, for both these unweighted ratios, there was no clear difference between PNC electorates and non-PNC electorates.

There was great variation between individual electorates, however, and this may go to issues of broader fairness. For example, the size of electorates can differ by a factor of over 8 times between the largest and smallest.  The 2011 Census says there are 133,452 people over the age of 17 in Angalimp-South Wahgh in Jiwaka Province (although only 125,502 names on the 2017 electoral roll) while there are only 16,309 people over the age of 17 in Goilala in Central Province (although with 29,176 people on the electoral roll).

Looking at the 2012 election results, there were many close races where only a few hundred votes would have made a difference.  If the ruling People’s National Congress party (PNC) of Prime Minister O’Neill was deliberately aiming to bias the election (amongst all the noise), one would target key marginal electorates.  Targeted actions, such as not providing enough ballot papers to even one key ward where the main opponent’s support was located – or a key university – could easily swing the outcome for the election.  Examples of such “marginal” electorates include the following: PNC close wins – Port Moresby North West by 17 votes after preferences, South Fly by 31 votes after preferences (and lost on 1st preferences by over 400 to THE), Nawae by 433, Madang Open by 544 (disturbing reports of police shooting scrutineers there on Sunday 9 July), Okapa Open by 645, Kairuku Hiri Open by 1,162 and Kokopo by 1,201.  Other examples where the ruling PNC lost a close electorate include the following: Gazelle Open – PNC won the 1st preference tally by 77 votes but lost after distribution of preferences by 113; Gumine Open – PNC lost after distribution of preferences by 536 – in Manus, PNC won the first ballot but lost by 257 (Manus Provincial also close, as was Milne Bay Provincial).

There has been a discussion on the meaning of a failed election, and the possible determinates – see here as well as the comment on the broader interpretation provided by the Supreme Court in failing the Local Level Government elections in 2013.

No specific figures have been provided on the level of Australian support for this election. Reports are the figure is around one-half the level provided in 2012 (this needs confirmation). Certainly, the figure is much less than the expected support for the 2018 APEC meeting which is expected to exceed $A100 million -see here. It is difficult to explain this choice of priorities in supporting democracy in our closest neighbour, especially given concerns about growing Chinese influence.  Of course final responsibility for the election and how it is conducted rests with the sovereign country PNG.  As a close partner, with historic responsibilities and key national interests, we should have done better.

PNG’s fiendish fiscal figures – a historical perspective

Summary

Using PNG’s updated GDP numbers, there are new insights into PNG’s economic history. In particular, they show how bad the last four years have been:

  • PNG’s budget deficits over the last four years are the worst in PNG’s history.
  • From 2012 to 2016, deficits have totaled an extraordinary 23.8% of GDP
    • This is nearly three times higher than the next worst five-year period for spiraling deficits (8.7% from 1992 to 1996 with five-year periods based on parliamentary terms).

  • These daunting deficit figures are the driver behind the explosion in public debt from 17.3% of GDP in 2011 to 35.5% in 2016.
    • In the 1992 to 1996 period, debt started at much higher levels (28% of GDP) but still didn’t reach 2016 levels (34.4% in 1996 vs the current 35.5% level using 2016 FBO numbers and IMF figures on 2016 GDP).
  • There are two drivers for these historically high budget deficits.
    • First, the massive increase in expenditure in 2012 was the largest in PNG’s history – and there was another substantial increase in 2013.  Since 2015, the government has embarked on the most severe expenditure cuts in PNG’s history (earlier articles indicate that key areas such as health, education and infrastructure are being particularly cut).
    • Second, there has been a collapse in revenues back to 1995 levels.  Almost all of this reduction reflects the fall in growth in the economy probably resulting from exchange rate shortages and concerns about economic policies in areas such as land, agriculture and SMEs. Revenues are going down even faster than the government expenditure cutting which explains the increased in the deficit level from 2015 to 2016.
  • As PNG is in an election campaign, I will not draw out the conclusions from the above analysis concerning the current government’s record on economic management.

Details

For those that know me, I have a deep interest in PNG’s economic history. A tok pisin version of earlier analysis is available here with the English version available here. A big issue for this analysis has been the dramatic increases in measured GDP (or size of the economy) by the National Statistics Office as well as the massive overstatement of recent economic growth rates by the current government according to the IMF – see here.

With a consistent GDP series now going back to 1980, it is now possible to examine some key economic indicators through time.

An earlier post examined the extraordinary falls of some 30% in average standards of living since 1980 (measured by real non-resource GDP per capita) – see here or in tok pisin here. This post examines some key budget (or fiscal) ratios.

The following graph provides a high level summary of PNG’s fiscal performance from 1980 to 2016.

The green line shows the government expenditure to GDP ratio (source for all expenditure and revenue figures are PNG Treasury Budget documents).  Essentially, it shows how large government spending is relative to the total size of the economy.

Over the last 36 years, there is a general pattern of the government spending more relative to the size of the economy – particularly from 1989 to 2014.

However, despite this increasing ratio, government expenditure has not kept up with population increases and inflation. This is a key factor behind falling service levels (in addition to issues such as weakening institutions, corruption, poor expenditure decisions).

Earlier analysis using the old GDP estimates suggested that PNG had government spending much higher than most other countries in the Asia-Pacific region.  However, with the new figures, the levels of government involvement in the economy are much closer to PNG’s developing neighbours.

One feature of the graph is the large increase in the government expenditure share from 2011 through to 2014. This in part was based on counting the chickens before they were hatched – risky assumptions about the size of revenues from the PNG LNG project.  This historic increase was followed by a historic decrease – a somewhat crazy roller coaster ride.  As discussed elsewhere, the cuts made from 2015 are more severe than those imposed on Greece and they have, contrary to government statements, targeted areas such as health, education and infrastructure.

The revenue and grants line is shown by the brown dotted line.  This line was in slow decline from 1980 through to the mid 1990s before it started growing through to about 2011.  In particular, there was a ‘bump’ on top of this widespread revenue growth from the strong mineral revenues in the mid-2000s.

However, this line has fallen off a cliff in a way never before experienced by PNG.  This reflects a collapse in tax revenues from outside of the resource sector, reflecting a major drop in growth and a likely recession.  Of course the 2015 drought and the fall in commodity prices have had an impact – but these account for less than one-third of the fall in revenues relative to expectations – see here.

The gap between the expenditure line and the revenue line is the size of the government’s budget deficit (if expenditures are greater than revenues) or surplus (if revenues are greater than expenditures).

PNG has usually had a budget deficit – averaging about 1.5% of GDP. This is regarded as moderate for developing countries, and normal economic growth rates (in part based on good investment decisions) would comfortably cover such deficits without concerns about debt levels.

However, over the last five years, PNG has had its four largest deficits as a share of the economy in PNG’s history.  Even the 2012 figure of a 3.2% of GDP deficit is the equal seventh worst in PNG’s history (matches the 1982 deficit) with 1992 and 1993 the in-between bad deficit years.

The top graph  adds five years of government budget balances as a share of GDP.  The 2012 to 2016 combined deficits of 23.6% of GDP are extraordinarily large – nearly three times higher than the next period on 1992 to 1996 (which included a severe economic crisis in 1994 to 1995).

These deficits have to be paid for by someone – and this is driving the doubling of PNG’s debt levels relative to the economy from 2012.  Such a path is clearly not sustainable.

Future analysis with the updated figures will also examine some monetary aggregates and trade ratios. The aim is then to produce a more comprehensive update on PNG’s economic history.

 

 

 

 

Ol ki elemens bilong ikonomik histori bilong PNG long taim bilong independens kam inap long nau.

[This post was written for PNG’s 40th anniversary and will be updated with new NSO based figures which show development has been even slower than earlier analysis – see here  – Original English version of article here]

Samari

  • PNG ikonomi em i 3.3 pla taim moa bikpela in ril tems den long taim bilong independens
  • Long olgeda wanwan man na meri long taim bilong indipendens Wanpela man long taim bilong independens, i nau wankain olsem 2.6 pela pipol.
  • Job growt ino grow wankain olsem populason growt, em i stap bihain yet
  • Ril inkam bilong ol woklain em pudaun long mark bilong 4% bihainim long taim bilong independens ikam inap nau– dispela em i lon we tru lon mak PNG i laikim.
  • Bikpela polisi rong PNG ibin long taim bilong indipendens i kam inap nau, em i olsem, em bin fokas tumas long ol neturel risoses (kain olsem LNG, gold, na loggin) na em ino fokas tumas long ol pipel olsem risos.
  • Dispela fokas long ol neturel risos tasol i kamapim wanpela kain dualistik ikonomi long PNG, we developmen i benefitim ol wanwan manmeri tasol.
  • Risos sekta bilong PNG em i gat liklik impek long ol mejoriti bilong ol manmeri long PNG, na em i wanpela sekta we i ken senis tumas. Taim ol bin statim produkson long Kutubu oil filds na ol narapela niupela mains long eli 1990’s, I kamapim bikpela inkris long GDP long mak bilong 36% namel long 1991 na 1994 – dispela em i bikpela moa long dspela 25% inkris long ril GDP namel long 2014 na 2015 taim PNG LNG projek i bin stat. Tasol long 1994, PNG ikonomi i bin stap long riseson (ikonomi go daun), na tu kes na foren eksens i pundaun wantaim. Na long 2015, i luk olsem dispela woklo kamap gen, taim yumi lukim PNG i stap long riseson gen afta ol promis bilong bikpela risos revenu i kamapim ol pua fiskol, moneteri na struksol polisis.
  • Dispela risos problem em bai kamapim “strongpela kina”
  • Dispela strongpela kina bai bagarapim ol lokol ekspotas (wantaim ol rurol famas), lokal prodaksen, na em bai mekim ol manmeri invest autsait long PNG na ino insait lo PNG. Dispela em luk olsem ki risen wai PNG ino kisim treid globolaiseson. Wanpela moa kompetitiv prais setti wantaim olgeta hap blo wol i wanpela isi polisi sens we i ken putim PNG long gutpela rot i go developmen.
  • Igat bikpela waidspred na growin konsen insait long PNG, long pundaun bilong kwaliti bilong gavamen sevis diliveri. Na long wantaim displa ol konsens bilong kwaliti na gavenens, wanpela elemen bilong dispela, em olsem trutru level bilong gavaman ekspendisa igo long wanwan man i pundaun go daun sins indipendens long K1, 873 i kam K1, 851.
  • Wantem ol bikpla bajet defisits na ol bikpla moa lokal tax koleksens, bikpel risen bilong dispela diklain long gavman ekspendisa, em diklain long aid long wanwan manmeri. Dispela em pundaun long K660 long wanwan manmeri igo daun long K170 long wanwan manmeri –dispela trutru pundan long sapot pe kapita i stap long mak bilong 755. Pundan bilong ol sevis deliveri em i link wantem pundaan bilong Australian aid.
  • PNG igat bikpela potensol na opotuniti em i stap. Tasol dispela potensol ino kamap long ol pipol yet.
  • PNG em mas igat moa gutpla polisis, moa gutpla ol institusens na moa inklusiv divelopmen long neks 40pla yar we bai yumi i ken den mitim ol driman bilong ol pipol.

Ikonomi gro bilong PNG sins indipendens

Displa ikonomi blong PNG, bihain lo inflasen emi 3.3 pla taim moa bikpela den long 1975. Long taim bilong indipendens Planti ol man meri i bin dautim olsem ikonomi em bai gro olsem, bikos long ol salenses dispela niupla kantri i bin feisim long em. Dispela grow em i kilia stret lo kain ples olsem Pot Mosbi – emi nau kamap moa moden siti wantem ol friweis na flai-ovas na ol naispla hotels, trafik jem, polusen, bikpla ol stoa na kainkain ol bikpla longpla bilding lo dauntaun. Dispela emi sowim osem ikonomik polisi blo PNG emi wansaid lo ol taun ples tasol.

Long PNG, yumi i ken tok olsem Dispela trutru gro emi bikos lo populesen emi go antap tru. Sins indipendens populesen i kirap lo 2.9 milien igo antap lo 7.6 milien. Lng olgeta man-meri lo taim bilong indipendens, igat lo tete, lo averij, 2.6 pela pipol.

Benk of PNG bisinis seveis i tok olsem namba bilong ol man na meri i wok long fomol sekta i woklo go antap hariap tru na i dabol. Lo sem taim, ol wok gro emi positive (2.1 pla taim inkris long 1978 go long 2014), displa emi trangu stret osem emi no stap arere wantem gro bilong popolusen (2.6 pla taim go antap). Yumi ken tok olsem, displa namba blo ol weking-eij man-meri usait sapos lo kisim wok lo fomal ikonomi i woklo pundaun go daun stap. Displa emi no inklusiv gro.

Ol i save tok osem PNG emi wanpela risos dependent ikonomi. Dispela emi no toktok ol i sapos lo tok, bikos non-risos sekta emi gat rekod lo bikpla sher stret lo 93% blo ikonomi (lo 1984) na liklik sher stret lo 70% (lo 2006). Risos sekta bilong PNG em i gat liklik impek long ol mejoriti bilong ol manmeri long PNG, na em i wanpela sekta we i ken senis tumas. Taim ol bin statim produkson long Kutubu oil filds na ol narapela niupela mains long eli 1990’s, I kamapim bikpela inkris long GDP long mak bilong 36% namel long 1991 na 1994 – dispela em i bikpela moa long dspela 25% inkris long ril GDP namel long 2014 na 2015 taim PNG LNG projek i bin stat. Tasol long 1994, PNG ikonomi i bin stap long riseson (ikonomi go daun), na tu kes na foren eksens i pundaun wantaim. Na long 2015, i luk olsem dispela woklo kamap gen, taim yumi lukim PNG i stap long riseson gen afta ol promis bilong bikpela risos revenu i kamapim ol pua fiskol, moneteri na struksol polisis.

Wanpla gutpla mesa lo ikonomik pefomens emi lo lukluk gut long non-risos GDP-  dispela ol sowim lo orenj kala long Figa 1 (gutpela infomeson bilong non-risos GDP i evailabol tasol long 1980 kam antap). Non-risos GDP emi bin gro isi isi lo festpla twenti pla yar statim lo 1980. Taim yumi bin abrusim leit 2000’s, gro ibin go hariap liklik tasol displa gro emi go daun gen lo 2010.

Figa 1: Non-risos GDP na GDP pe kapita lo 2015 kina.

Wanpla gutpla moa mesa emi long ikonomik pefomens usim ol pe kapita figas – so bai yumi lukim hamas inkam emi stap aveilabol long wanwan manmeri. Blu pela lain lo figa 1 emi sowim displa. Sori tasol dispela lain emi bin go daun lo 1980’s na 1990’s. Bikpla pundan stret emi i bin bikos lo displa ikonomik kraisis lo leit 1990’s. Wanpla peten blo rikavari emi bin stat isi isi lo 2005, tasol ibin go daun lo 2012 na nau emi go daun olgeda. Long 2015, usim wanpela faivpla yar averis, inkam emi stap fo pesent moa tamblo den lo taim umi bin stap 1980 (displa faivpla yar averidg blo non-risos GDP pe kapita ibin stap K4, 604 lo 1980 igo lo 1984 na lo 2011 igo long 2015 emi stap lo K4, 443 – displa sowim olsem inkam i pundaun long 4 % – dispela drop lo trutru inkam em bikpla sapos ol laik lo komperim wantem 1980 na 2015 – we em drop long 8%). Taim yumi usim displa trutru mesa bilong ikonomik welbin, emi nau klia olsem trutru inkam bilong PNG i pundan go baksait stap. Na niupla data bilong 2016 i sowim olsem dispela emi bai kontinu long go wos.

Dispela emi no gutpela, na i long we tru long ol driman ol manmeri i bin gat long taim bilong indipendens. Dispela em i stap longwe tru too long ol driman yumi gat insait long Vision 2015. Wai na em i olsem?

Risos kes blo PNG – samting kamap bipo i woklo kamap gen

 Bikpla kes blo PNG i save kam lo displa ol inta-seksons blo risos gifts blo graun na ikonomiks. Displa “risos kes” emi woklo kontinu lo bagarapim planti ol ikonomi. Na wanpla kua ol bin traim lo PNG (lo displa Minerel Risos Stebilaisasen Fand – na displa model emi gutpla gen lo displa nogud model umi woklo usim stap ol i sa kolim lo Welt Fand Model), tasol korapsen, nogud politiks na nogud ikonomik polisi bung wantem i mekim osem displa risos kes i stap yet na emi kamap bikpla beden tru na woklo stopim ol trutru divelopmen i sapos lo kamap lo em. Displa risos kes i andapinim displa Bogenvil sivil woa na em i stil gat risk lo bagarapim PNG wantem displa ol deili niuspepa ripot i sowim ol papagraun ino hamamas wantem ol se blo risos benefits. Lo wanpla isi isi na ino gutpla wei, displa risos kes impeks lo exsens reit i woklo paralaisim ol sans blo PNG bung igo insait lo displa eisien sensuri.

Bikpela rong PNG i makim bihainim indipendens em i long lukluk strong tumas lo ol nasorol risoses (kain osem LNG or gold or logging) na ol i no lukluk strong lo pipol risoses. Lukluk strong lo divelopment efots blo ol man-meri, kain osem sapotim ol smolholda agrikalcha o givim ol strongpla tingting lo stap insait lo infomal sekta, i bai ken givim wanpla peten blo divelopment wantem moa waidspred na inklusiv benefits. Lukluk strong long ol nesorol risoses i makim wei long tupla kain ikonomi wantaim divelopment benefits wan wan man-meri tasol i kisim.

Mi bin sore tru taim mi bin ridim ol toktok lo PNG osem igat pundan lo Kina reletiv igo lo US dola bihainim displa bikpla point yumi bin richim lo 2013. Displa wik Kina emi givim sem ikam lo kantri bilong yumi. Osem wanpla ikonomist mi yet, mi ken tok osem displa em wanpla rabis na krangi toktok – tasol moa impotent lo sait blo divelopment blo PNG, emi wanpla strongpla toktok we emi ken poretim ogeda man na meri lo hia.

Lo displa 2 milien pla man na meri usait sa makim mani lo planim ol kaikai, “strongpla Kina” em wanpla nogud pla nius bikos displa em min osem ol i bai kisim liklik mani lo ogeda beg kofi o kakau ol salim lo em. “Strongpla Kina” ol i save osem emi ino gutpla lo ol expots na treid kompiting indastris kain osem agrikalcha, fiseris, turism na SME’s. Tasol lo wanpla pablik sevent lo Mosbi, displa “strongpla kina” emi min osem wanpla beg rais na wanpla niupla dijital TV emi bai kamap liklik mani lo em lo baim.

Narapla samting lo tingim, displa “strongpla kina” i bai gat strongpla ol sosol implikeisens. Minim osem em bai kamapim ol strongpla senis pasin lo ol man-meri lo lusim wok blo planim kaikai na mekim mani lo ples na ol i bai laik lo go lo taun na wok blo kisim pei osem ol wokman na meri. Emi gat strongpla impekt lo said blo ol meri, emi bai nonap luk save gut lo hatwok blo ol meri lo domestik agrikalcha. Emi bai kamapim ol strongpla tingting lo ol man na meri lo salim ol mani blo ol igo aut lo narapla ovasis kantri kain osem lo mekim ol haus lo kens na putim mani lo ol o salim ol pikinini blo ol go skul lo ol narapla ovasis kantri. Displa bai i stopim ol foren investment lo PNG bikos emi bai mekim ol moa expensiv lo ol narapla destinesens.

Displa wanpla prais, displa exsens reit, igat ol strongpla impekts tru lo klostu ogeda kain divelopment.

Displa risos kes ibai lid igo lo displa “strongpla kina”. Displa raitpla exsens reit mesa stret, emi wanpla samting ol i save kolim lo “Ril Efektiv Exsens Reit” o REER. Displa emi sa mesarim ol muvments lo kina we i save pas wantem ol bikpla treiding patnas wantaim ol infleisen reit diferenses. Lo displa graf tamblo em i sowim osem, taim kev ya i go antap moa, kompitisen blo ikonomi tu i go antap moa.

Figa 2: kompitivnes blo PNG (ol i sowim lo ril ifektiv exsens reit)

Displa bipo polisi lo ol eli yar bihain lo inipendens ol i save kolim lo “hadpla kina” ol i jastifaim lo sait blo meintenim makro-ikonomik stebiliti – tasol displa bai daunim kompitivnes blo PNG lo displa impotent taim blo divelopment blo kantri. Displa floting bilong kina lo 1994 bikos lo ol pua o nogud polisis lo Kutubu oil risos buum i kamapim wanpla on-going impruvment lo kompitivnes kam inap lo 2007. Tasol displa ol ifekts blo PNG LNG projekts na ol pua o nogud polisi intafiarens lo exsens reit i daunim kompitivnes level igo daun moa lo taim em i bin stap lo taim blo inidipendens. Lo bringim gutpla senis pasin lo level blo kompititivnes lo PNG thru lo exsnes reit emi wanpla bikpla impotent polisi instrament lo bringing gutpla senis lo divelopment prospekts o divelopment as tingting blo PNG.

Tasol lo mekim gutpla senis lo kompititivnes o impruvim kompititivnes bai igat ol bikpla distrubusenal implikeisens – minim osem, displa ol we i save rilai lo expots bai kamap beta of, taim ol displa sa rilai lo impots bai kamap wes of. Displa bai benefitim ol man na meri lo ples na bai bagarapim ol pablik sevents na planti man na meri lo ol taun ples. Em bai benefitim displa ol lain sa rilai lo bisinis lo domestiik PNG prodaksen na bagarapim displa ol sa rilai lo ol bisinis lo impots. Igat ol dainamik or senis elements istap lo ol kain adjastment. Displa sot tem lusas bai laik lo toktok planti na ol long tem geins blo ol SME’s na ol niupla bisinis we i gutpla lo ol moa intaneisenal kompetitiv sans lo ol Asian senturi bai laik lo stap isi na passim maus. Lo strongim kain polisi em ol hatpla wok stret lo political wei. I nogat wanpla “silva bulet” istap lo divelopment, displa senis em i mas lo stap wantem ol displa planti narapla jeneral impruvments lo pablik polisi (kain osem ol gutpla regulesen, moa inklusiv na saistenabol polisis).

Pundan lo gavman expendisa emi bikos lo pundan lo halivim blo Austrelien eid

 Igat bikpla wari emi stap lo PNG lo disla pundan lo kwaliti blo ol gavman sevis diliveri, oldo experiens emi ino wankain namel lo ol provinses na iven lo ol sektas (kain osem, edukesen i woklo mekim gut moa lo helt).

Namel lo disla olgeta wari na koros, igat ol mitigeiting fektas tu i stap. Iven lo meintenim ol besik sevis dilivri luk osem bai kamap wanpla strongpla salens bikos lo bikpla namba blo ol man na meri we i ba gat bikpla nid lo apim namba blo ol tisa na klasrum na ol medikol wokman na meri. Wanpla trupla tok we ol ino save toktok planti lo em em osem trutru level blo gavman expendisa lo wanwan man na meri i pundan go daun ogeda bihainim indipendens (lukim lo figa 3). Kisim faivpla yar everidg lo smutim aut ol anuel flaksuasens na ba yu lukim osem trutru expendisa blo wanwan man na meri emi pundan lo K1, 873 igo daun lo K1, 851 (lukim lo kala pepol kolum). So displa liklik pundan lo sevis i sapos lo kamap iven sapos ibin nogat kirap lo korapsen o pundan lo abiliti lo ol institusens lo diliva.

Wanem ol samting stret mekim na displa ol pundan kamap? Fiskol polisi em ibin stap lus wantem ol bikpla defesits – so displa em ino kos. Domestik revenu reising lo wanwan man meri (grinpla kolum i sowim lo em) igo antap abrusim liklik mak blo 30% – wanpla gutpla pefomens bihainim displa pundan lo non-risos GDP pe kapita bihainim indipendens na kam. Displa praimeri kos em i bikos lo displa bikpla pundan lo eid we i sapos lo stap blo wanwan man meri. Displa emi pundan bikpla tru – lo araun K660 wanwan man kam lo K170 – wanpla trutru pundan lo sapot pe kapita blo 75 pesent. Pundan blo sevis delivery emi bikpla tumas na em i meinly bikos lo pundan blo Austreilen eid.

Figa 3: Badjet straksa blo PNG

Konklusen

 PNG igat bikpla potensel na ol bikpla opotunitis istap. Displa ol potensol ino go lo ol man meri blo PNG. PNG i stil woklo karim na tingim ol hevi blo bipo taim blo em stap yet. Stil igat planti ol tingting blo 1975 stap yet taim PNG ibin stap osem wanpla koloni bl Austreilia na yumi no traim lo tingim osem yumi wanpla modenaising pasifik kantri. Lo ogeda tok mi tok pinis, mi stil gat bel isi lo fusa blo PNG, tasol igat planti yar stap yet, planti pen ba ol imas go thru lo kisim divelopment na planti samting stap yet lo lainim.

Igat planti ol interekting elements istap lo halivim na impruvim wel-bing – na ol impotent wans stret ino ol ikonomik wans. Tasol mi laik tok tasol osem wanpla ki senis lo polisi praoriti em i lo lukluk strong lo ol man na meri moa na ino tumas lo ol risoses.

Displa strongpla lukluk lo risos na bihain ol strongpla kina astingting ba sa pas wantem ol divelopment. Displa em karim kaikai lo hap stori blo strongpla kina pinis. Displa hap stori i wansait gen lo ol lokol expotas, lokol prodaksen na mekim wei lo ol man na meri lo invest autsait lo PNG taim ol sapos lo invest lo insait lo PNG. I luk osem em wanpla ki rison wai na PNG iwoklo mis aut lo treid globolaisesen. Wanpla moa kompititiv prais seting polisi senis bai halivim lo stiarim PNG igo lo wanpla gutpla divelopment kos. Na displa em bai halivim lo dil wantem nesinolistik tendensis na em bai nonap lo imposim ol moa bagrap kain polisis kain osem impot bens o inifisient gavman lidim monopolis.

Bai PNG mas igat gutpla ol polisis, gutpla ol institusens na om moa inklusiv kain ol divelopment bihain lo next pla 40 pla yar lo kisim ol trutru astingting blo ol man meri blo PNG.

PNG’s Debt Crisis Risk – Sky-rocketing Public Debt Charges

Summary

PNG is facing a serious debt crisis risk.

The threatened debt crisis results from the extra-ordinary increase in Public Debt Charges during the O’Neill government.

In 2016, these public debt charges totaled K13 billion.

In 2012, these charges totaled only K1.5 billion.

Almost all of this extraordinary increase comes from an explosion in repayments of domestic debt.  These repayments have increased by over one thousand per cent from 2012 to 2016.  Every single month, the PNG Treasury, through BPNG, needs to raise nearly K1 billion just to keep debt rolling over.

PNG’s debt crisis risk is this enormous monthly debt rollover burden. If there is a loss of confidence, then the crunch point could come very quickly.

Debt crises are rarely about failure  to repay an interest bill or just because of some very high debt to GDP ratio.  They come when a principal payment cannot be made – when debt cannot be rolled over and there is a debt default. This applies to the private sector or governments. And with a looming debt default, governments usually have to turn to the IMF (the cheap option with conditions), other international financing (expensive with fewer conditions), or start printing money very quickly (high inflationary risks and a slippery slope).

And the O’Neill government has now massively increased the monthly rollover burden and made PNG very vulnerable to a debt crisis.

There are other falling debt indicators under the O’Neill government which are also sounding loud warning bells (figures in table below):

  • The rapid increase in the size of official debt – from K8.5 billion in 2012 to K22 billion in 2016 – a 160% increase – when will this stop?
    • Another 160% increase over the next four years would lift official debt to K57 billion by 2020.
  • Uncertainties about the true size of total public debt as some is being hidden in SOEs or in BPNG’s balance sheets – figures of closer to K40 billion have been used but they cannot be verified because of government secrecy.
  • The rapid increase in debt interest costs – from K0.3 billion in 2012 to K1.3 billion in 2016 – now over one-tenth of the budget – money no longer available for health and education – the third largest area of expenditure which is being hidden by the government during the election campaign – see here.
  • The rapid increase in the size of debt relative to GDP – from 19.8% in 2012 (using NSO’s new GDP number) to 35.5% in 2016 (using IMF GDP number).
  • The rapid increase in the interest repayments to revenue ratios – from 3.6% in 2012 to 12.1% in 2016 – see an excellent article here.

The PM is correct in that PNG’s debt to GDP ratio is not high relative to other countries, but this ignores two critical issues which any true leader would consider:

  • First, the current PNG government is not following its own Fiscal Responsibility Act which limits debt to 30% of GDP.  If the government is not following its own laws, those which aim to provide a “fiscal anchor”, how can the government be trusted on economic management?
  • Second, ratings agencies and others do not look at just one figure – and the combination of the very rapid increases in all debt indicators as shown above  is a real cause of concern.  Little wonder that Moody’s decided to continue with PNG’s 2016 credit rating downgrade to B2 – five levels below “investment grade”.

The above graph showing the explosion in domestic debt repayments is a very worrying development. It reflects a decline in market confidence in the government (with the quantum shift to shorter term maturities). It also reflects PNG’s poor economic management over the last five years on debt, the budget, the exchange rate and sustainable growth policies.

For the sake of their children, electors should listen carefully to these warning bells of sky-rocketing debt crisis risks.

Details

One element of the O’Neill government’s economic mismanagement has been the rapid escalation in debt. This has been driven by the largest budget deficits of any government in PNG’s history.

The latest Treasury budget document (the 2016 FBO) indicated these deficits are growing once again (back to over K3 billion). The 2017 budget played some tricks to try and hide how bad things were – see here with Tok Pisin translation here.  On debt, the 2017 budget forecasts have already been shown to be fraudulent with debt levels at the end of 2016 already exceeding the expected outcome for 2017 – see here.

One key element of debt mismanagement has not received much comment. This is the extraordinary increase in overall public debt charges.

There is some confusion about these public debt charges, especially principal repayments.

Debt principal repayments are a cash flow out of the annual Parliamentary budget appropriations and must be paid for.  These debt repayments are supposed to be included in the annual budget appropriation bills. However, the government forgot to do this in 2016 – a breach of the constitution which undermines Parliamentary democracy – see here and here . Fortunately, the government did include these repayments in the 2017 Appropriation Bills.

But there remains confusion – see here for an excellent explanation by an aspiring woman leader – Ms Kessy B. Sawang.  Although debt repayments are included in the formal budget appropriation bills that should be passed by Parliament, they are not included in the annual budget.

For example, the 2017 budget totals K13.3 billion.  The PNG Parliament’s appropriation bills for 2017 total K20.4 billion.

Such treatment is appropriate and aligns with international standards.  Debt interest payments are an annual charge on loans and represent budget expenditure. Debt principal repayments are a financing item.

However, in addition to the rapid increase in public debt levels, PNG’s debt financing has moved dramatically towards very short-term debt maturities. Outstanding short-term Treasury Bills are now greater longer-term Treasury Bonds of (K8.7 billion vs K7.8 billion in the 2016 FBO).  But even this does not show the dramatic move to even shorter loan terms in Treasury Bills. These are now often issued for only 3 months – requiring them to be paid out and re-borrowed several times every year.

Treasury acknowledges this shift by noting the “increase in the frequency of refinancing or roll-over of Treasury Bills whose maturities are six months or less throughout 2016.” (2016 FBO page 16).  Indeed, in the 2017 budget, the Treasury described there being a “quantum shift by the major investors away from
longer tenors of 182 days and 364 days to shorter tenors of 28, 63 and 91 days” (page 53).

To make “space” for these shorter term loans, the central bank has had to reduce its own monetary policy controls through the issuance of Central Bank Bills. There was the expectation that the level of short-term Treasury Bills would reduce later in 2016.  However, BPNG’s most recent Monthly Economic Bulletin, when explaining the major expansion in PNG’s monetary base of nearly 20 per cent over the last year, states “This was mainly due to significant retirement of CBBs by the Central Bank in December 2016”.  There was no monetary policy justification for such a change. The central bank is getting out of short-term debt for monetary policy management to allow the PNG government to finance its budget deficits and growing debt rollover requirements.

And this move towards shorter-term debt has put PNG on a dangerous treadmill.  Debt  is having to be rolled over much more often.  Most of the K1 billion required in financing every month is just to rollover existing debt – needing to borrow again just to pay off last month’s borrowing. In itself, this is a reflection of declining confidence in the government.

And if this confidence declines enough, and even one bank or superannuation fund decides they would rather keep the cash rather than take the risk in lending money to the government again, then a financing cash crisis can occur with surprising speed.

The experience of debt crises in the past is that there can be warning signs, but when they happen, they can happen very quickly.

PNG electors need to listen to the warning bells.