PNG '22: Politics same; economy uncertain
04 January 2022
PORT MORESBY - As we begin 2022, I want to take a look at the defining issues that will shape Papua New Guinea’s social, political and economic outlook.
It’s not possible to cover everything in one article, but consider this an introduction to issues I’ll expand on throughout the year.
In this piece, I look at PNG’s political and economic outlook, and in a companion article I’ll consider security and governance issues.
Writs for the PNG national election will be issued in April and parliament will dissolve around June.
Most of June and July will be taken up by campaigning, polling and vote counting. A new government should be formed by the end of July, and normalcy will return around August.
On average, half of the incumbent MPs lose their seats in national elections.
You can expect the same thing to happen again. It’s difficult to predict who’ll be re-elected but the trend suggests that those who have served longer than two terms will be advantaged.
Over the years, PNG’s elections have progressively become violent. This is an extension of the overall breakdown of law and order and responsibility should not be laid at the feet of electoral officials or the Royal PNG Constabulary.
The police-citizen ratio in PNG is one of the worst in the Asia-Pacific region.
Lack of investment and the politicisation of the police hierarchy (seen in the revolving door of police commissioners) has weakened the ability of police to maintain law and order.
In 2017 alone, about 100 people died as a direct result of the national elections. And this doesn’t take into account the deaths that followed the elections –the related tribal violence that continued on to the next election.
Bribery, intimidation and electoral corruption have become constants in PNG politics.
And most of these issues will be recurring and feature prominently in this year’s election.
You just need to read the 2017 General Election Observation Report published by the Department of Pacific Affair at the Australian National University to understand that it is also a view of the future.
After the election, there will be chaotic lobbying as various groups seek to form a government.
The Governor-General is required by law to invite the party that has the largest number of MPs to try to form the government.
It is not clear that the Pangu Party of prime minister James Marape will have the numbers in 2022. Marape has been just two years with the party that led PNG into independence and divisions within Pangu are a matter of common knowledge.
For instance, Morobe Governor Ginson Soanu and Marape constantly clash over the Wafi-Golpu gold mine. The governor is against the mine’s proposed deep sea waste disposal and Marape wants the mine to go ahead.
In 2017 Morobe Province elected eight Pangu MPs, but that was in a Pangu Party led by Sam Basil.
Another key political issue will be whether the MPs in the current coalition stick together if they win.
The constant party hopping has seen National Alliance, United Resource, Pangu, People’s Congress and United Labour trade places between opposition and government making it difficult to establish a stable coalition.
So you can look at the next government as starting from a clean slate from which a new coalition will be formed. Past alliances will not count.
The first 18 months following August 2022 will be covered by a grace period during which the government cannot be removed through a vote of no confidence.
But by February 2024, you can expect a vote of no confidence. Votes of no confidence are a permanent feature of PNG politics, so it’s almost guaranteed that by 2024 there will be attempts to remove the prime minister regardless of performance.
It is then likely that this instability will continue until mid-2026. A vote of no confidence with the intent to replace the prime minister cannot be instituted within 12 months of the anniversary of the return of writs of the previous general election.
This tends to have a calming effect on the political dynamic.
The PNG economy, hugely resource intensive, tends to oscillate according to the rise and fall of commodity prices.
There is an excellent study of the PNG economy by ANU and UPNG researchers, which I link to here.
Due to complex agreements and contractual arrangements, companies like Exxon Mobil don’t pay much tax to the PNG government for its liquefied natural gas production.
It’s not a tax holiday but a deal that allows Exxon to be first recompensed for its capital outlay on constructing PNG LNG.
Only when the debt is paid off, will PNG see the real benefits of the project.
Other resource companies like Ramu Nickel enjoy tax holidays.
These arrangements have resulted in low revenues for the government.
The non-extractive resource sectors like agriculture and fisheries have generated better revenues but these are small compared to the minerals, oil and gas sector.
Things may improve with Porgera gold mine, expected to start operations in 2022.
If the proposed Wafi-Golpu mine goes ahead, the construction phase will bring in the foreign currency much required by the PNG market.
The PNG central bank has been rationing foreign currency and this has affected business performance and profitability.
Both the Wafi-Golpu mine and the Frieda mine in the Sepik are facing resistance from environmentalists and local communities.
It is not clear whether either will get off the ground, especially Frieda Mine, which is adjacent to the Sepik River. Local people are highly dependent on the river for their sustenance, especially fishing and sago production.
Some people have applauded the Marape government’s effort to increase its stake in Porgera and Papua LNG. Apart from the government-owned Ok Tedi mine, Porgera and Papua LNG represent the biggest share PNG has negotiated and received in any commercial operation in the country.
Opinions are divided on whether these were good deals for PNG. Porgera comes into operation in 2022, whilst Papua LNG is planned to start in 2027.
You can follow this conversation by subscribing to the comment feed for this post.