Papua New Guinea, aid and economic growth



We live in a time where more people have been pulled out of poverty than at any other time in history. This has not been achieved by foreign aid but through free markets and economic growth.

Recent commentary has exposed the problems of criticising PNG’s pro-economic growth agenda, and elevating foreign aid as the centrepiece solution to the many domestic hurdles facing our nearest neighbour.

These views have emerged out of Australian Senator Fierravanti-Wells’ recent “aid is not charity” comments after PNG’s request for $558 million – our total current aid package to the country – to be paid to PNG in direct budget assistance.

‘Direct budget assistance’ – essentially placing Australian tax dollars into PNG’s budget book – is viewed with obvious scepticism on both sides of the Torres Strait. For years Papua New Guineans and Australians have watched as aid money has been spent across health, education, law and order sectors, with seemingly very little to show.

Indeed, the Senator’s comments, although seen as a regional ‘warning shot’, are merely a confirmation of shared common sense among many Papua New Guineans and Australians – public money should be wisely spent, accountability enforced and, over the long term, dependency avoided.

The simple question for the Australian taxpayer is – why should we provide more money? This is not ‘pandering to jingoism’, as one recent comment revealed, but an entirely justified enquiry as scrutiny mounts on Australia’s ever-expanding national debt. And similarly for PNG voters – why should the PNG government receive more money, especially in light of such poor service delivery?

This last question can be answered more directly at PNG’s 20 April national election. Counting can take weeks due to the nation’s difficult topography, and large degrees of uncertainty will no doubt follow based on fragmented alliances and cross-party deal making. But current Prime Minister Peter O’Neill’s government, and the man himself, has done well in PNG leadership terms by stoking economic growth, generating political stability and maintaining ‘rules of the game’ for PNG’s accelerated business environment. While none of this has seen seismic improvements in government service delivery, or pushed PNG up Transparency International’s corruption rankings, it has enlivened a sense of national momentum – an intangible benefit that shouldn’t be thrust aside.

And it is here where I sense PNG’s future lies. Not in aid or an overreliance on government but on a sharpened commitment to economic growth. A little known fact about PNG is that, over the past ten years, it has been one of the fastest growing economies in the world. Thanks largely to a decade-long commodity boom, and what appears specifically to be a decent future in Liquefied Natural Gas. Optimism continues to drive PNG’s economic outlook despite shaky forecasts in the last few years.

Seizing on these opportunities in PNG is actually a distinctive approach that Foreign Minister Julie Bishop has brought to the portfolio from her time in opposition. Her policy platform ahead of the 2016 federal election, in fact, recapped and double-downed on the importance of “open markets and trading regimes, free and open access to markets for all nations to the global commons” and a “rule-of-law system in which governments do not interfere in the legitimate activities of commercial firms and individuals.” While these comments were aimed at Asia, PNG’s improvement relies on being brought into this orbit and striving toward these pro-growth characteristics.

But free markets and economic growth, critics rebut, are not for everyone. It’s known, for example, that only 5 per cent of PNG’s population earn a wage in the formal sector, which is where the direct benefits of commerce play out. The corollary of pointing this out ultimately becomes a case not for expanded markets but an increase in foreign aid and associated development programming. Yet it’s also important to acknowledge that ‘spin off’ activities tend to occur from the formal economy, which can see an upswing in manufacturing, construction and agricultural sectors, let alone PNG’s informal sector where opportunities are difficult to formally capture but are none the less apparent.

Ultimately, the debate over foreign aid can be an academic point for many Papua New Guineans when hospitals are poorly stocked, roads are unpaved and there aren’t enough police. I have met many Papua New Guineans who, frankly, aren’t holding their breath for improved political and governmental performance but eager to seize opportunities – with or without foreign aid. Capitalising on these opportunities and growth is also not going to be pretty. This is very likely to strain PNG’s social fabric – higher crime rates, distorted property rights (transitioning from communally-held to privately-owned land), a breakdown of the traditional family or ‘wantok’ kinship structure, and ongoing tribal violence.

While these aren’t winning markers of progress they are inevitable and universal pains that all young and growing nations like PNG endure as they seek to grow and escape poverty. Tilting toward foreign aid will not generate widespread opportunity or provide answers to PNG’s most pressing national challenges. However, looking to free markets and continued economic growth will drive up living standards, enliven individual initiative, generate unprecedented opportunities and, for both Papua New Guineans and Australians, mitigate shared concerns on public money, accountability and, over the long term, dependency.

Sean Jacobs has worked at all levels of PNG government and currently lives in Brisbane.

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