PNG deserves an independent, comprehensive and factual Economic Update. Treasurer Basil, please deliver the type of update PNG really needs!
The country waits eagerly for the promised Economic Update by Treasurer Basil on Monday 24 June. For too long, the truth has been hidden from the people of PNG. We know that there have been way too many lies and fake budgets. We know there has been a lack of transparency. And when things are hidden, the chances for corruption grow rapidly.
So what should the people of PNG, and the new Prime Minister of PNG, expect from Treasurer Sam Basil in this update on 24 June?
With the welcome new performance focus of Prime Minister Marape, it is useful to set out some key performance indicators (KPIs) for the Economic Update. As a constructive contribution to the better public policy so desired in PNG, the following criteria will allow a fair assessment of the economic update. And we will assess Basil’s update according to these KPIs – we do hope it will be a positive assessment on this report card. In this first of three parts, let me set out the first KPI.
Key Performance Indicator (KPI) 1: Is this an Independent and Credible Assessment?
Honesty and credibility is the key to the Update. The people of PNG know that the previous O’Neill/Abel regime kept trying to hide the hard facts. They manipulated budget numbers. They manipulated National Statistics numbers. They hid the performance of the SOEs. They sacked public servants who spoke up about unrealistic public work costs. They pressured the media to stop talking honestly. They tried to ban social media. They banned people from the country who tried to speak the truth. The O’Neill/Abel regime just wanted to live in a world of “fake news”.
So the first priority is to ensure that the people of PNG truly believe there is no more “fake news”. I honestly believe that our new Prime Minister Marape wants the truth for the nation, not more “fake news”. I think he expects to hear the truth, however painful, so he can lead the team to fix the problems. As Prime Minister Marape has stated, “I know the economy has been bleeding and struggling”.
Given the deceptions of most of the economic team that have delivered “fake news” in the past, how do we assess the credibility of the update. I suggest four criteria for the government’s economic team to consider.
- First, does Prime Minister Marape consider the update independent, credible, comprehensive and reliable?
- Second, has there been independent input to the assessment such as from several international organisations (such as IMF, WB and ADB), local organisations (such as PNG’s Institute of National Affairs, UPNG, NRI), accounting firms (although sometimes payment gets desired figures) or community groups?
- Third, will the Treasurer guarantee “whistle blower” coverage for those who dare speak out and tell the real truth? Often the best way to get to the truth is allowing more junior staff to speak up, even if providing contrary evidence to the head of the department.
- Fourth, has feedback from Facebook and other social media sources been honestly considered? The fundamental issue is getting the views of how PNG people actually feel things are going. Social media is valuable extra way, beyond bureaucrats and self-interest, to hear a voice about the honest story.
Over the next two days, I will send out information on the second and third KPIs. I do hope that the “Clowns from Crown” are up to the task!
Key Performance Indicator (KPI) 2: Does the Economic Update provide the big picture?
The reason for doing an Economic Update is to reveal previously hidden facts to help determine the best policies for meeting the government’s new objectives. This is evidence driven policy making. The starting point needs to ensure that the economic facts are put within the big picture! People don’t eat GDP numbers – there is a need for a wider perspective getting to the reality of how tough family life has become in PNG.
So the update should also include an honest assessment on how PNG is going on broader development issues.
- How are we going to make PNG a much richer Christian black country?
- How do we best measure how we take back PNG?
- Does the Update include updated numbers covering social, governance, freedom, environment, sustainability, ownership, empowerment, and human development indicators?
- In particular, does the Update provide a clear statement on the situation facing our children and how this has changed over recent years covering items such as health access, education quality, employment prospects, housing availability, water supply and sanitation and electricity supply?
Without this big picture, then we forget why we need a growing economy. We lose the reason for having a better economic update. Our Prime Minister has a vision for PNG “where not one child born into our country irrespective of colour, ethnicity, religion or politics is left behind”. We need to establish the benchmarks for us to ensure that not one child is left behind.
Key performance indicator (KPI) 3: Really get into the factual detail
Of course the Update needs to include updated budget figures as we would expect in a standard Mid Year Economic and Fiscal Update (MYEFO). If this is all that is delivered, even if independently verified, this would be a massive failure. At such a time of economic crisis, the people of PNG deserve so much more!
Why? The structure of the traditional PNG budget does not give complete information on the true state of economic affairs for our proud nation. This is due to failures of issues such as coverage, timing and updated valuations.
On coverage, the budget does not reveal the complete information on all organisations that are actually paid for by the people of PNG through their taxes. In particular, we seek answers to the following questions:
- Does the Update provide an open statement of all the assets and liabilities of our State-Owned Enterprises (SOEs)?
- Does it include all formally and informally guaranteed debt to various state and private organisations?
- Does it include a true actuarial value of debt such as the K400 million paid to investors for Solwara 1 – the dubious seabed mining operation which has recently been taken off the Canadian stock exchange?
- Does it include a full and transparent statement of how much the people of PNG lost on the very dubious and possible illegal UBS loan for Oil Search shares?
- Does it include a statement on why the last Minister tried to bury the latest Kumul Petroleum Annual Report?
- Does it include a full and transparent costing of APEC?
- Does it include the actual cash balance sheet for every government account at a bank or similar institution?
- Does it provide detail on all our debt including to commercial lenders as well as all loans from other countries such as China with the detail covering grace period, interest costs, fees, repayment period?
- Does it clearly set out what new borrowing has actually been spent on?
- Does it provide a valuation on the implicit cost of tax concessions provided to firms (an updated and comprehensive tax expenditure statement indicating specific firms that have benefitted)?
The people of PNG deserve a complete coverage of as many of the real economic skeletons that have been off the formal O’Neill/Abel books. Abel’s failed 100 Day plan promised to deliver updated annual accounts for SOEs by June last year. The people of PNG are still waiting because he was unAble to deliver once again!
On timing, the O’Neill/Abel regime, deliberately suppressed information on the timing of payments simply to make the budget books look better. So to protect the false image of improved budget deficits, they simply played games by delaying paying bills. They did not pay legitimate bills for valid contracts to PNG businesses. They played games in bringing forward illegitimate funding advances from Kumul Petroleum and claimed they were revenue dividends. They played games with revenue by not revealing delays in GST refunds. They have likely hidden other implied loan guarantees or other forms of government backing. The Economic Update should at least catch up to the standards of private sector accountability on timing of payments that is used in the private sector and I think is vital for our public accounts. The following questions should be answered:
- What is the full estimate of unpaid bills – contractors, rent, utilities, etc?
- What is the full estimate of unpaid salaries and allowances?
- What is the full estimate of unpaid superannuation?
- What is the full estimate of refunds that have not been paid such as GST refunds?
- What is the full value of advances that were recorded as dividends in the budget?
- What is the full value of all formal and informal loan guarantees or similar undertakings that create a potential legal liability for government or its institutions?
- What is the full value of and for which firms of tax credits?
On updated valuations, the budget should be assessed on good and accurate valuations. Recent budget figures suggest there has not been a realistic valuation of the value of different State Owned Enterprises. The great fear is that assets have been overvalued. At the same time, liabilities have been under-valued. We need honest information of true estimates of the assets and liabilities of all public entities including SOEs. The current economic team is unlikely to provide this due to their vested interests in hiding their earlier untruths. Have proper actuarial valuations been provided on the true asset and liability position of the government?
What a mess! I hope the Economic Update clears up this mess! But unfortunately, I fear it will fail big time. Not because of our new Prime Minister. But because of the “Clowns from Crown”.
If it doesn’t meet all of the KPIs above, then the new Prime Minister should re-consider his economic team. How does he deal with the “Clowns from Clown” when delivering the Economic Update? Can they meet the KPI’s above about credibility, PNG’s true broader development picture and correcting the recent fake budgets? True economic help, really, is available if you ask …
|Shadow Minister for Treasury & Finance
21 June 2019
Following are three graphs that help set out the type of economic issues facing PNG. These should be covered in the Economic Update to provide the context for finding the solutions for making PNG a much richer Black Christian country where not one child is left behind.
Graph 1: Vision 2050 aimed for specific improvements in PNG’s Human Development Index rankings but instead PNG is going backwards. The Vision of 2050 was that PNG would move into the top 50 nations. The interim target for 2020 was to move from 148th in 2010 to 123rd by 2020. Instead, PNG has gone backwards to 153rd by 2018.
Graph 2: One key measure of becoming “richer” is movements in living standards (best measured in PNG by real non-resource GDP per capita). After improvements in the 2000s, PNG’s living standards are now going backwards. So after increasing on average by nearly K1,000 per person from 2006 to 2012, living standards growth slowed and then has turned very negative with the overall fall in living standards of K500 per person from 2012 to 2018. On average, every person in PNG is K1,500 worse off due to the economic mismanagement of the last six years – we went backwards by K500 instead of forwards by K1,000.
Graph 3: Employment is a key economic issue. After growing strongly, job numbers are now going backwards. If there had been the same level of formal sector jobs growth of 15,000 new jobs each year from 2012, there would be nearly one-third more formal sector jobs – 120,000 extra people working. The taxes from this extra employment would be enough to get rid of the budget deficit.