Delusional O’Neill's calamitous legacy
03 October 2019
ALBERT SCHRAM | Edited
The first of three articles based on Chapter 4 of Dr Schram’s memoir, ‘Experiences of a Vice Chancellor in Papua New Guinea’. Link here to read the full chapter
"We think of politics in terms of power and who has the power. Politics is the end to which that power is put" (Ngugi wa Thiong'o, Kenyan writer and academic)
VERONA - I want to thank my more than 7,000 followers on Twitter, LinkedIn and Facebook for their encouraging comments on this series, and Keith Jackson for publishing the short versions.
Many of my followers are students, sponsors or relatives of students, or among the over 6,000 graduates for whom I signed degrees. Thank you all.
I will make a few remarks on the economic and moral environment in which Papua New Guinea’s universities operate. The disastrous state of the economy since Peter O'Neill took over in 2012, stimulated dishonest and opportunistic behaviour.
Dishonesty in turn was further justified by exceptionalist 'logic' and the fundamental difficulty many Papua New Guineans have in accepting that everybody is equal before the law, and that rules should be applied to everyone without exception.
The tribal wantok system seems the only system that works, and it is what most people are comfortable with.
Since 2012, continuing misgovernment, thievery and wasteful spending have put a terrible stress on society due to Peter O'Neill's callous and delusional economic policy. In 2014, in some areas in the highlands there was a fully-fledged famine and at one point the World Food Program was supporting over 250,000 people with food aid.
The non-payment of liquefied natural gas revenues to landowners by the government has led to a continuing civil war in Hela and Southern Highland provinces, which ironically are the provinces the current and previous prime minister hail from.
For the University of Technology, UNITECH, where over 50% of students come from the highlands, this created a difficult operating environment. Many parents and sponsors were unable to pay the fees on time.
In recent weeks, Ian Ling-Stuckey MP, the excellent treasurer in the new Marape-Stevens government, has made abundantly clear how disastrous the legacy of the O'Neill government has been for state finances.
It is unwise for any country to run a greater than 5% budget deficit. The European norm, for example, is 3-4%, and these are strong economies. Stuckey has stated that O’Neill has left a "shameful legacy".
However, worse news is yet to come. The large deficit can be addressed relatively quickly by controlling expenditure and improved tax collection. It will be painful, but it can be corrected within a few years.
The real issue is ballooning debt, a result of O’Neill running high deficits year after year and embarking on some disastrous projects such as Pacific Games, APEC and the Oil Search share purchase.
High interest loans were taken from international loan sharks rather than from reputable international organisations, burdening generations to come with debt repayment.
In the coming weeks, the total extent of the debt and interest payments will become clear, and it is doubtful whether PNG can avoid defaulting on debt payment. A Latin American 1980s style debt default and crash is far from imaginary.
We must remember how many people rode on Peter O'Neill's gravy train.
In fact, the UNITECH chancellor and all members of the university council were appointed by him, serving as recipients of political patronage and being offered an opportunity for private rent seeking.
Though this group so far has refrained from diverting university funds to their own pocket, they have done themselves and their relatives other favours.
Part 2 tomorrow – ‘PNGs odd racialised post-colonial morality’
Barely seven months ago this was the discussion. The legacy of Peter O'Neill. It has taken this long to become a topic of conversation and this is a shame.
It's a shame not only of the media, of politicians, of public servants but of the expectations of people throughout Papua New Guinea.
The shame is that too little thought is given to the belief that "anyone can make an improvement".
In Oro Province last year, a friend of mine sighed when I made this observation. He explained to me that most folk just try to get through each day, and do not look further forward.
So if today we read of an "overall decline in the quality of training at universities where students took journalism as second or third choice", will that understanding continue the conversation in the direction of action?
Will it leverage an ethical elevation in a landscape that has the appearance of a quagmire of indifference?
Even the speed at which each PMV hurtles down the highway and around precipitous corners gives no apparent alarm to passengers (my experience at looking at their faces since 2005).
So also, in more recent years, the descent of economic prosperity in PNG has failed to bring forth much outcry upon the drivers of the national momentum.
Shame about that. Whither PNG's national esprit de corps?
Posted by: Lindsay F Bond | 08 May 2020 at 07:56 AM
The fact IMF admitted failure in Greece is a great start. It means they are willing to learn from their mistakes and to avoid some of the pitfalls in other similar cases.
Key is always that whatever solution we adopt to get our economy going again would be a negotiated outcome. It means we have as much say in the solutions as they do.
We have certain strengths that we can lean on. First being land. Communal ownership of and utilisation of land shields our people from the headwinds of the cash economy. This is a great strength.
Any austerity measures being implemented would therefore be less catastrophic for a majority of our people than if the same were to be implemented in a totally cash dependent economy.
Given the importance of land for our sustenance, whatever economic solution that seeks to alienate land from us is a no no and must be rejected outright!
Multilaterals like IMF and others should know this basic fact about us by now and must steer clear of land when considering measures to help stabilise our economy.
The second opportunity for government is to sell the SOEs to raise funds to bridge the funding gap. Only a few SOEs would sell though given the poor state each of them is in. But the privatisation agenda should be pursued regardless.
Thirdly, government should change the mandate of Kumul Petroleum and simplify it so that it only exists to raise financing to enable government to fulfil its legislated back in rights in petroleum projects.
All our share of dividends that flow to this organisation should be diverted straight into consolidated revenue to fund government budget.
We also have a portion of circa US$2bn held in PNG Sustainable Development Company that could be released under some arrangements to help restore the economy.
Perhaps IFM and the likes could guarantee a loan from PNGSDP to the government in exchange for SOEs which would then be privatised in an orderly manner over a period of time?
We have options and we need to go in knowing what those options are. Let’s get on the front foot and suggest ways in which we can help ourselves and then invite them to help us help ourselves.
Posted by: David Kitchnoge | 07 October 2019 at 03:54 PM
These are IMF's own worlds about their Greece project.
"Market confidence was not restored, the banking system lost 30 percent of its deposits, and the economy encountered a much deeper-than-expected recession with exceptionally high unemployment. Public debt remained too high and eventually had to be restructured, with collateral damage for bank balance sheets that were also weakened by the recession. Competitiveness improved somewhat on the back of falling wages, but structural reforms stalled and productivity gains proved elusive."
Project Managers for such undertakings gets sacked, not re-engaged in another environment hoping and believing for a different outcome.
Posted by: Corney Korokan Alone | 07 October 2019 at 02:32 PM
A very respected Thai national retorted recently that they had to swallow their pride and work together with multilateral organisations and international partners to bail out their country after the Asian financial crises.
The Asian financial crisis started in Thailand and things got pretty bad. But together with international partners and friends, they rescued their economy. Thailand today is a first world country.
We can learn from the Thai experience.
I believe Sir Mekere's reforms introduced when he was prime minister were guided by certain multilateral organisations advising us.
There was mayhem as politicians and fear mongers swooped on our ignorance and got our university students worked up. But we have since lived to see the benefits of the reforms that were undertaken.
We can do it again. I think we have a formidable treasurer backed by someone like Sir Mekere behind the scenes who will represent our interests well in undertaking the rescue mission.
Posted by: David Kitchnoge | 07 October 2019 at 10:40 AM
The idea that IMF is a problem solver is a fallacy. It has failed Greece, Argentina and Ecuador and countless others.
The stubborn IMF and its policy doses are not needed in beloved Papua New Guinea
Posted by: Corney Korokan Alone | 04 October 2019 at 01:51 PM
Stephen Howes and Paul Flanagan have been around during PNG's budget surplus years (2004 – 2010?).
I respectfully request that you point us to at least three peer-reviewed researches and documentations around what those surplus budgets have produced for Papua New Guinea in terms of any significant developments. I will then respond based on your substantive data and facts.
The readers will also be pleased to see and read your substantive reports on the “rule-based market capitalism and liberal democracy” that you unashamedly subscribed to.
We will be happy to hear how those rules have delivered for Papua New Guinea. If fact we had a good discussion on this last week, https://www.pngattitude.com/2019/09/contrarians-writers-needed-more-than-ever.html
We are less inclined to be intimidated because we are able to differentiate the fluff that consultants and so-called experts trade on. Nobody is oblivious of the facts on what the real economy runs on and crafted around.
Thank you Dr Schram. I have watched and read Dr Dambisa Moyo quite extensively.
Most of what she delivers is powerful and refreshing. She is a learned economist. However, you might be surprised to come to the realisation that the People’s Republic of China is light years away from the West in terms of digital payment – the stuff of modern economy.
So is China's modern rail and other transportation infrastructure that wallops the West’s so-called "rule based capitalism”. The latter cohorts' meandering into unfounded wars and fear mongering based corporatocracy is clearly unsustainable as one of the real renowned economists, Thomas Piketty demonstrates here:
Posted by: Corney Korokan Alone | 04 October 2019 at 10:36 AM
Priceless reply to Corney Alone on twitter: "Congratulations Corney. You never fail to stand up to defend some of the most unethical and corrupt scoundrels in PNG. On top of that you are incessant in your attacks on truth telling economists and academics and your defence of dishonest politicians."
Posted by: Albert Schram | 03 October 2019 at 07:40 PM
Thank you for your comments and questions.
I am not pretending to be a PNG or an economic expert or to bring anything new to the table, although I have published a few informal papers on the topic.
Two years into the O'Neill administration I was still optimistic that PNG could achieve its vision 2050 (http://bit.ly/2RjAo1l)
But in 2018 I turned more pessimistic after seeing so much mismanagement and corruption (http://bit.ly/2n604Ur)
Serious analysts of PNG economy like Prof Stephen Howes at the Australian National University and Paul Flanagan (now, since Marape, back in PNG as an economic adviser) have published consistently about the effects of Peter O'Neill's misguided policies.
See for example Howes on 8 August 2019 http://bit.ly/2o2xT9w, or Flanagan or 13 June 2019 http://bit.ly/2puBOw1.
It is odd that these analyses are so little known, or maybe understood, in PNG.
As to the role of the IMF, it is part of the United Nations system and its mission is to provide low interest loans to countries who need it.
Granted, its actions have not always been successful, but multilateral support has helped numerous developing countries.
The problem in PNG is that it does not like IMF conditionality, which , for example, would force the rationalisation and possibly privatisation of its two dozen or more state owned enterprises.
Most of them are loss making and function merely as objects of political patronage. When Peter O'Neill jumped into bed with the Chinese, PNG veered further away from rule-based market capitalism and liberal democracy.
It was not the only one, listen for example to the inimitable Dambisa Moyo (http://bit.ly/2oFfMXe) or on long term growth the late Hans Rosling (http://bit.ly/2oFgQuc)
As to the Africa, it dwarfs the Pacific in terms of population and land mass, so comparisons are not so relevant. Overall the continent presents a diversified picture, but the 3%+ economic growth rates in East and West Africa over recent years are the envy of PNG (see Brookings Institutions https://brook.gs/2pATbeZ.)
In sum, I am happy to have pricked your bubble. There is a reason economics is called "the dismal science".
Posted by: Dr Albert Schram | 03 October 2019 at 04:24 PM
Please Dr Schram give us a break. Non PNG Attitude readers might mistake us as a country sharing the horn of Africa though they are not our tribal wantoks.
Whatever the offences of the O'Neill reign, we are a resilient people who have survived from time before and will do so without the government patronage though we would appreciate the convenience of the modernity with all its flaws.
Posted by: A G Satori | 03 October 2019 at 12:39 PM
I like prime minister Marape's intentions. He seems to be sincere and I feel I can trust him.
Treasurer Ling-Stuckey has made some noises, and there is always a political angle in things politicians say, but I feel that he is also sincere.
He has said what he needed to say and now we wait to see the proof in the 2019 supplementary budget and 2020 budget proper.
It serves no purpose to be cheeky about things and if Marape and Ling-Stuckey are for getting rid of this behaviour, putting things out in the open, being honest about our situation and correctly diagnosing our economic status, then I'm all for it.
90% of the solution is the problem. Diagnosing the problem though is the harder part. Fixing it is easy if you know exactly what's broke.
PNG awaits Treasurer Ling-Stuckey's diagnosis of what's broke and what the fixes are.
Posted by: David Kitchnoge | 03 October 2019 at 12:19 PM
Reading Dr Schram’s blog post, I fail to see any demonstration of critical faculty in his diatribe.
It's laden with cheap character assassination.
The premature crediting of ' excellence' to Treasurer Ian Ling-Stuckey without seeing any demonstrable semblance of what he has practically delivered to the national economy is also telling on why anybody should take Dr Schram's assessment seriously. What is that based on?
Bemused to read where the heck, Dr Schram learned that countries can get better loans from the United Nations here?
If he is referring to IMF and the World Bank, then we have bad news for neo-colonialists who peddle their trade as if we are still stuck in the 15th century. These tools' documented records don't appear anywhere near friendly and benevolent to my beloved country.
See what these creatures have been up to over the years here: http://www.thirdworldtraveler.com/IMF_WB/TenReasons_OpposeIMF.html
Posted by: Corney Korokan Alone | 03 October 2019 at 06:41 AM