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Cooking with gas?

05 January 2015

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Download the report A lost decade? Service delivery and reforms in Papua New Guinea 2002-2012 on the Development Policy Centre website.

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Will Papua New Guinea’s first LNG project and wider economic boom bring benefits to locals, asks Hamish McDonald.

For years truck convoys have been rumbling through the night along the pot-holed 700-kilometre highway into the Papua New Guinea highlands from the port of Lae.

Their drivers watch out for bandits as they near their remote destination – ExxonMobil consortium’s Hides project in PNG’s Southern Highlands. Huge cargo planes have flown into airstrips carved out of the mountains.

Finally in May 2014 PNG’s first LNG project was all assembled and working. Natural gas started flowing from Hides project, down the southern slopes to the swampy Papuan Gulf coast, and then through an undersea pipeline to a liquefaction plant near the capital Port Moresby.

ExxonMobil shipped the first liquefied natural gas cargo out to Japan soon after.

In 2015, Papua New Guinea will see the first full year of production from a project that has taken US$19 billion to build in one of the world’s most inaccessible places.

The country’s gross national product will make a one-time jump of 15 per cent or more, just from this one project. It will add about US$1 billion a year to government revenues, for 30 years. Companies are also eyeing two more LNG projects drawing on petroleum discoveries around the Papuan Gulf.

But the question nagging many development economists and planners is: will the good macro-economic numbers be reflected in benefits for the vast majority of Papua New Guinea’s eight million people, their numbers growing at a high 3.1 per cent a year?

One person doing the asking is Charles Lepani, the PNG high commissioner in Canberra and former head of Port Moresby’s National Planning Office.

He sees “a yawning gap or chasm between policies and politics on the one hand in Papua New Guinea, and the will and capacity to spend PNG’s increasing wealth on the priorities that will bring about qualitative change in the lives of our people, particularly the rural majority.”

Lepani was speaking at the launch of a new report that lays bare the uneven progress in translating GDP growth into better government services for ordinary citizens.

PNG’s National Research Institute and Crawford School’s Development Policy Centre sent teams out to 360 primary schools and primary health care clinics across Papua New Guinea in 2012, measuring services against the position 10 years earlier.

Was it a ‘lost decade’ as the report’s title asks? The answer is yes and no.

In primary schools, the news is positive overall. The average school in 2012 has 58 per cent more children enrolled than it did in 2002, and 144 per cent more girls. Though average class sizes are bigger (with up to 75 pupils in some classes in Port Moresby), schools have more classrooms and teachers.

Basic education is making gains over population growth, Development Policy Centre director Professor Stephen Howes points out. Population grew about 30 per cent over the decade, school attendance by 80 per cent.

With health services, it’s bad news. The average public health clinic sees fewer patients and has a lower level of drug availability than 10 years ago. Over 40 per cent get no funding trickling through from the government.

“A lot of the clinics seem to be abandoned, left to their own devices,” Howes says. Some 82 per cent no longer carry out regular ‘health patrols’ in which staff travel to outlying villages for check-ups, vaccinations, and so on.

About one third of the schools and clinics surveyed were run by church groups, and generally showed more regular funding and more dedication by staff.

“The results show that development progress in Papua New Guinea is neither inevitable nor impossible,” the researchers conclude. “The last decade was by no means completely lost.”

The report should be a ‘clarion call’ to his government to improve delivery of basic services, Lepani said. But the 2015 national budget recently presented by Prime Minister Peter O’Neill’s government gives little indication of that yet.

Spending is subject to new restraint to allow fast repayment of debt that has ballooned beyond the 30 per cent of GDP limit mandated by PNG law. A lot of funding for grass-root services and infrastructure remains with discretionary funds handed to individual members of parliament.

Following three years of relative political instability after O’Neill took power, Port Moresby may be heading for a period of familiar turmoil.

In February, O’Neill completes 30 months since his current term began, and a ‘grace period’ of protection from no-confidence motions in parliament will end.

He is also fighting legal challenges on two fronts that could potentially force him from office. One dating from his time as finance minister in a previous government concerns questionable payments to a legal firm, the other concerns alleged irregularities in a A$1.3 billion loan to buy a national stake in Oil Search, an Australian partner in the Hides and other LNG projects.

Whether the LNG and other mineral wealth is a blessing or a curse is yet to be proven.

Hamish McDonald is journalist-in-residence at The Australian National University’s College of Asia and the Pacific. This piece was first published on the College’s website:

Download the report ‘A lost decade?’ at the Development Policy Centre website.

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