ASOPA: School died while still under review
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Avoiding a screwing in investment & trade

BY COUNTRYSIDE

THE RAMU NICKEL debacle highlights a chronic symptom that afflicts the people and government of Papua New Guinea.

Not corruption, but rather the lack of a clear policy direction on investment and trade relations.

It has become increasingly difficult for PNG to negotiate agreements and arrangements around investment and trade that have wide ranging benefits beyond a simple agreement to sell our resources.

Having sat around mahogany tables in Canberra, Beijing, Brussels, Geneva, New York and Washington negotiating foreign and trade relations for our great country, the golden question every shrewd negotiator asks is “what’s in it for us.”

We tend to prematurely react by giving everything under the sun - tax holidays, environment waivers, blocked legal proceedings etc. When the other side then waits for our demands, we have a vertical demand - money. Nothing more.

China has huge technological, capital and human resources that PNG desperately needs: in defence, ICT, innovation, agriculture, health, education and host of other areas.

Therefore, our objective should be to investigate the horizontal benefits that may accrue to PNG and move deeper into pushing them as the fundamental basis of investment and trade relations. In other words, not just money but our development aspirations must be articulated in negotiations.

We do entertain giving tax breaks, but the larger, more sticky, questions of immigration, environment and social issues require thousands of hours to ponder. T

When it comes to the inevitable negotiating trade offs, my dear friends, this is where on so many occasions we fail to raise the flag. 

We need to fight the fight at the negotiating phase, which is far more effective than the courtrooms.

All over the world I have witnessed a desire to invest and trade in PNG. From the Gulf of Aden to the foothills of the Caucuses right to the plains of the American west, they all fly in to see what’s going on in Ramu, Freda, Komo, Kikori, Pac Manus, Simberi, Cromwell and more.

The public service is stretched and runs on bare bones, we extend scarce resources to establish negotiating demands. The saving grace at the moment is highly intelligent ministers, seasoned negotiators themselves, who are making the hard yards and articulating our development demands.

The current Minister for Foreign Affairs and Trade, Sam Abal, is an exceptional man who has a great understanding of investment and trade relations compared to his predecessors and fellow ministers.

When last year he pushed aid effectiveness as the precursor to investment and trade to his then Australian counterpart, Stephen Smith, he changed the vertical approach PNG government had been using.

In summary he said, if you’re genuine in being a partner, let’s talk about aid and everything that comes with it. The benefits of this horizontal approach is that is permits development issues to be discussed and traded off with rocks, gas, oil, fish and any other material the Aussies are interested in.

As in any policy articulation, Cabinet discipline is required to allow Minister Abal and his officers to contribute meaningfully in natural resource negotiations with Exonn Mobil, MCC and the rest, so they work within a sound investment and trade framework that promotes the PNG agenda.

Abal’s  officers need to formulate appropriate negotiating modalities. Only than we can tell the likes of China that it’s not all money, and to give us our due.

Countryside is a senior Papua New Guinean public servant

Comments

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Alex Harris

Countryside, thank you for your thoughtful insider analysis. It is a breath of fresh air on the edge of despair. Reg Renagi has also impressed me with his analysis of government and what it could be. But hope for change alone is not enough. How can we help?

Peter

In 2002, a Mr Michael Matthew was retained by Michael Somare to function as PNG's exclusive representative in attracting foreign investment into the country from North America.

Apparently the contract between the parties broadly agreed to pay Matthew a commission based on the value of investments he attracted to PNG.

It was purely a verbal contract between Matthew and Somare.

Matthew sought payment of his commission which the PNG Government refused. Matthew sued for US$150 million. The matter went to arbitration where Matthew lost and then to the US Court of Appeal. Matthew lost again.

A full transcript of the Court of Appeal judgement is now available at LEAGLE -

http://www.leagle.com/unsecure/page.htm?shortname=infco20100930143

Moral - don't rely on verbal contracts with Sir Michael Somare.

Question - why would Somare allegedly agree to a deal which gave one individual exclusive rights to attract investment into PNG, potentially to the value of billions of kina, but - it seems - not put anything in writing?

Paul Oates

In 1970 I was given a very significant lesson in negotiation skills.

Pat, the local Co-ops Officer (a Buka islander), was visiting my Base Camp at Mindik when an old woman knocked on my door with a huge bilum full of oranges.

The local oranges were typically green on the outside yet ripe on the inside but there was no way I could use so many.

When I asked if I could buy half her fruit the woman got upset and demanded that I either buy all or none.

She had obviously decided she would sell all of her oranges to me.

At that stage, Pat took over the negotiation. “How much for the full bilum?” he asked in Tok Pisin.

“Eight Shillings” was the reply.

“Orait, bai yu skelim muli inap long tri siling na putim long graun” Pat said.

The woman, clearly angry, took half a dozen oranges out of the bilum and placed them on the ground.

Pat looked at the still full bilum and casually enquired if that was really three shillings worth? The woman thought about it again and took another two oranges and placed them with the small pile.

“Orait,” said Pat indicating the small pile of oranges on the ground, “Dispela emi tri siling a?” The woman emphatically agreed.

“Kain olsem na sapos dispela emi tri siling em bai olgeta narapela muli istap long bilum emi paib siling a?” explained Pat.

“Hia, yu kisim dispela paib siling na bai mi kisim olgeta muli istap long bilum.”

The woman’s face fell but Pat held her to the negotiation.

I must admit I would have given her a bigger payment but I could not be seen to undermine Pat, who I understand, later went on to become a ‘big wheel’ in Waigani after Independence.

Paul Oates

Dear Countryside, thank you for your thoughtful and comprehensive response. The situation you discuss is very heartening and the person you describe must be very worthwhile and a potentially excellent leader.

Rest assured, there are many who would like to help PNG and her people if only they knew how? Perhaps you could make a few practical suggestions?

Countryside

Dear Paul - Your observations of PNG leaders are quite true and I don’t dispute the insatiable appetite for greed clouds the role of a leader and as such, extremely ineffective in delivering to the people.

I have however observed an interesting trend and one that I look forward to participating in actively.

MPs are now beginning to come together with a high degree of discussion and debate of policy issues. The levels of discussions are quite technical and they do respond correctly when given a variety of options.

Several years ago, when I was partaking in negotiations with a developed nation, the lead minister took it upon himself to visit sectors that would be affected if a deal was not finalised. From factories, workers' households to operators.

He then went further, to have his officers thoroughly brief him on the socio-economic and commercial areas that would be affected if such an agreement was not made.

When he joined us, it was quite something that he instructed me with confidence and with so much passion on how to move on the technical issues, and hot political issues.

He had a one-on-one consultation with the PM to discuss them.

It was truly remarkable how this man, with so much power or access to it, was able to relate to a hugely complicated international relations arrangement and reflect upon it to the people he wanted to protect.

I observed from this MP three things:

(1) He was a man of God.

(2) He had a wonderful relationship with his wife of 20 years.

(3) He was super intelligent.

I have worked with other MPs who show similar traits. They want to change the mindset of the pollies everyone has become so used to and they are the traits you have described.

I suppose the great challenge is for these like-minded men and women to come together.

I have seen the desire for this to occur but the real challenge is for a concerted effort by PNGns to support and sponsor these virtues.

There is a political consciousness resonating in our men and women and they are yearning to do something for our country.

With extra cash in their bank accounts, they are daily talking about who they can spend their money on so that they can bring change and progress.

These are not your high flying landowners, blue chip CEOs or Asian backed goons, but rather the rising middle class: kids in the bush chipping rocks, accountants, doctors, bankers, public servants etc…

Yes, they are sick of the poverty and corruption and they try to find ways to forge and support leaders that share their view. This is propagating opportunities for leaders this country so desperately needs.

I know many reading my comments will be dismissive as they only read and hear the side of government that is incapable of such changes.

Having seen many PMs come and go, I am quietly optimistic that we are turning a corner and it’s not because of our natural resource endowments but finally, utilizing our greatest possession, our human resource.

Reginald Renagi

Good comments by Countryside to give an impression of what really happens at the moment.

PNG must now start developing in its pollies and bureaucrats a high level of professional negotiation skills with other countries wanting to invest in PNG, so at the end of the day we cut a good deal without giving away too much to the other side.

David Kitchnoge

We do have major policy gaps and our politicians must learn to effectively play their roles as policy makers.

They must set sound and broad based policy parameters on all aspects of public governance and allow our public service to execute them without political interference.

However, I don't believe we should discount the effects of corruption on our important decision making processes.

I do not disagree that we do not bargain enough for PNG at the negotiating tables and perhaps we get too one dimensional and allow money to cloud our thinking. But money for who?

If we are prepared to grant huge tax holidays, are we not then giving up money that should go to our consolidated revenue and used for development purposes? So how does the house of PNG gain then?

If money is indeed the deal breaker for us at the negotiating tables, one has to wonder whether that money actually gets to flow to our consolidated revenue. If not, then where?

Paul Oates

There's an odd change that seems to affect most politicians when they have been in power for any length of time. It's almost like a metamorphosis.

After a while, most politicians start to believe that the resources and funds they have control over are actually their own. The real owners of these resources and funds, ordinary everyday people, only get one chance to have their say every few years or so at an election. Mostly these real resource owners seem to be excluded from all parts of the distribution equation except during the run up to an election.

A second metamorphosis also seems to take place when politicians become government ministers. They then only want to hear advice that agrees with their own beliefs. Any advisor who dares disagree is got rid of and those who either agree with the minister or who have learnt to agree in order to save their jobs, then tell their boss what he/she wants to hear.

Inevitably, ministers then become totally out of touch with the people who actually elected them and trusted them to look after everyone's best interests. The longer these politicians serve, the more these two processes become exacerbated.

A third observation is that traditionally, only those politicians who actually had resources of their own were able to personally get themselves elected without depending on the salaries and allowances now provided to politicians. This scenario sometimes, but not always, tended to work against direct corruption as those in power didn't need any extra resources and could just as easily retire on their own without supporting the government and being given a pension after ten years of non controversial service.

Sir William Gilbert summed it up his impressions in 'HMS Pinafore' when the so called ruler of the 'Queen's Navy' sang:

"I always voted at my party's call,
I never thought of thinking for myself at all,
I thought so little, they rewarded me,
By making me the ruler of the Queen's navy."

In Australia these days it seems that the two main roads to get elected are a law degree and/or a union official's experience. Actually succeeding on your own in your chosen field of endeavour BEFORE you get elected seems silly when you can leap directly into the big-time via a very small group of people who are members of a political party of your choice and who decide to choose and support you as a candidate.

Perhaps PNG has a better way of selecting political candidates and ensuring once they are elected, they don't lose track of the real owners of PNG's resources?

I'd be interested to hear 'Country Wide's' views on this are.

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