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Keynote Address

The Rt. Hon. Sir Michael Somare GCMG CH K St J
Prime Minister

Stable Government, Investment Initiatives, and Economic Growth

8th Papua New Guinea Mining and Petroleum Conference

Sheraton On the Prk Hotel, Sydney 6-7 December 2004

Firstly, thank you for inviting me once again to this very important event. I consider this conference as one of the major calendar events for our country.

It is a calendar event, because it brings together leaders of the petroleum and mining industry and leaders of government to discuss issues of concern in a concerted manner.

It is my government's policy that working with the private sector is crucial for prosperity and nation building. One of the key initiatives of this approach has been the establishment of the National Working Group on Removing Impediments to Business and Investment, chaired by the Chief Secretary.

It is therefore my pleasure to address you today in a broad way on a number of initiatives that my Government has undertaken to provide a conducive environment for the private sector, including the petroleum and mining industry to operate in.

It is indeed my ongoing commitment and determined stance to ensure that the Government work together with the private sector to achieve our development objectives.

Challenges to growth and development

As a nation, we are approaching our thirtieth year of Independence. It has not been an easy journey since independence in 1975. We went into independence as a nation of many, many tribes and languages.

We were faced with enormous challenges of creating a country out of a complexity of tribal and ethnic diversity. However we went forward with the national slogan: 'Unity in Diversity'.

I must say, we have achieved unity.

All the problems of the past and the present are part of our growing up pains.

I have lived through those trying times but have never lost hope in the destiny of our nation. Largely these were challenges of political, administrative, and cultural nature that we had to grapple with as a young, emerging democracy.

I am pleased to say that today our democracy is more robust and stable. There is overall respect for the West Minster parliamentary system we adopted, and there is respect for the judiciary – the two important arms of government.

For me, having come this far as the first Prime Minister, the only agenda I have is that, I am determined to make a difference – that of getting the country forward where government works in partnership with the private sector.

And I am happy to say that we are already making good progress in that area.

As I have alluded to earlier, the past 29 years have been difficult. A number of times governments were changed in the middle of their term in office, often resulting in new governments not doing any better, or at times even worse than those replaced.

Too often, too much time was spent on playing the numbers game and very little attention was paid to the issues of development, including the need to develop a strategic alliance with the private sector.

I consider the private sector as the engine of growth.

Therefore, partnership with the private sector is critical for the success of any economic policy and national development programme the Government puts in place.
Rough as those times have been, you all must agree that Papua New Guinea is a remarkably resilient country.

The challenge for the Government is to take the country forward. In the five years before this Government came to power, our economy contracted by five percent.

Delivery of services was declining, inflation and government expenditure were out of control, companies were closing and down-sizing, excessively high interest rates were crippling the economy and the Kina had plummeted, sending the cost of goods sky-rocketing.

Living standards and the quality of life for ordinary Papua New Guineans were falling dramatically. Indeed, it was a very sad state of affairs that my Government inherited.

Since my Government took office we have introduced macroeconomic reforms and sound fiscal management.

As a result living costs are decreasing, opportunities for investment and growth are increasing and the Government can well and truly get on with its commitment to grow the economy, create jobs, boost incomes, and improve the delivery of services for all our people.

On the whole the economic conditions are improving, but we cannot be complacent. The road ahead is still tough.

There are risks and quick sands facing our progress. Issues like HIV/AIDS, unmanaged urbanization, and high population growth need to be addressed.

I am determined that as a Government, we will take a concerted approach to address these issues in order to achieve our development goals and objectives.

A stable environment is necessary for achieving economic growth. Political stability and prudent financial management are two of the most crucial structural reforms that my Government has addressed and will continue to strengthen.

Recently, there has been a lot of talk by my political opponents to replace the Government.

Ladies and gentlemen, there is no reason for any change of Government, especially considering the immense progress that we have made in such a short period of time to grow the economy.

All it requires now is to consolidate on the economic gains through a stable political environment and move forward in partnership with the people that know the business best – the private sector.

One area that requires partnership with the private sector is consultation on administrative, policy, and regulatory matters. Issues of impediments to business can be addressed through this consultation.

It is for this reason that I have set up the National Working Group on Removing Impediments to Business and Investment. It is intended that through this initiative a strategic alliance will be established with industry groups like the Chamber of Mines and Petroleum.

The role of this Group is to address administrative processes and procedures as well as policy provisions that are barriers to the establishment and development of business.

The Group is headed by the Chief Secretary to Government and comprises membership from key Government agencies and industry organisations.

It reports directly to the Prime Minister through the Central Agencies Coordinating Committee. In this regard, I am pleased to announce that a set of recommendations crucial for private sector growth and enhancement have been approved by Cabinet.

Action has commenced on a number of these recommendations.

The Chief Secretary will provide details in his presentation later in this Conference.

As part of our reform agenda, one of the key initiatives is in developing prudential standards in financial management, including fiscal discipline.

As a result we have achieved unprecedented results in budget outturn and macroeconomic indicators. The Treasurer who will speak after me will provide details on these achievements.

As part of the recovery agenda, my Government has introduced a wide range of reforms.

These will provide for better governance, a better public service, improved law and order, and improved services towards achieving a higher standard of living for all Papua New Guineans.

My Government remains firmly committed to our policy objectives on 'Reforms and Good Governance', 'Export Driven Economy' and 'Rural development, Poverty Reduction and Human Resource Development'.

The Government has a very clear vision of where we want to be by the end of this decade. This is set out in our recently approved 'Medium Term Development Strategy (MTDS) 2005–2010'.

The MTDS clearly establishes PNG's development priorities and the Government's strategies for public expenditure management and public sector reform agenda, which are crucial for growth over the next five years and beyond.

The Minister for Petroleum, Sir Moi Avei is the Minister who brought the MTDS to fruition in his capacity as Minister for Planning and I commend him on that.

On the whole, our key objective is to create the environment for sound and sustained investment. In hat regard, political stability is paramount. We are aware that an unstable country can bring in the 'jackals' and 'carpetbaggers'.

We want to create the environment for credible and bona fide companies to set up and operate.

For the Mining and Petroleum Community that we have dealt with in the past, they have in the main, abided by our covenants. In fact, they were compliant to a greater degree compared to other foreign companies in the resource sector.

If things have gone wrong in the mining sector, we as a nation have shared with you the lessons learned. One of them being a greater mutual understanding in the relationship with landowners.

We have addressed these problems with some give and take in how we share the benefits of our mineral resources.

The lessons we have learnt will gradually contribute to improving the management of mining and petroleum projects in the future.

We have, as a Government, taken positive steps in the taxation regime in consultation with the industry. The fruits are now paying off in improved industry performance.

One of the external factors we face is the negative perception about PNG that still exists. These are often based on selective reporting on every damaging incident that occurs. In reality visitors and those who come to work in PNG like the place.

Just look around you at this troubled global society we live in, and see what you find and try and make an honest comparison.

But we do realise that for the future, we need to deal with the negative perception.

The resilience of PNG, as I mentioned earlier, does not only come from the checks and balances of a unique multi-ethnic society, "unity through diversity", but it also comes from those overseas visitors who have made PNG their home and the commitment they have to a country that is not fraught with extreme materialism and the "dog eat dog" attitude of many other global societies.

Our key strategy is to aim for balance and improvement in the lives of our people and how we can best utilise PNG's great range of natural resources to that end.

Our main challenge in development planning is in changing our thinking from stolid central planning to strategies that provide the platforms for automatic takeoff in local and export growth.

We have started already in that process through the MTDS.

As part of that approach, the maintenance of our infrastructure and assets has become a priority as it is essential to our continuing and positive forward development.
Over the past ten years the basic road and maritime infrastructure has deteriorated and has been an impediment to our economic and social growth.

We are now investing in making what we have to work better, and will only look at new capital infrastructure on a cost return basis.

Relevant to Southern Highlands, an area of interest to the Mining and Petroleum Community, we have allocated K5 million for upgrading Tari Police Barracks and will be establishing the Southern Highlands Restoration Authority.

Once established, the Authority will be the mechanism through which public investment programmes will be managed in the most planned, accountable, prudent, and coordinated manner.

We have involved the private sector in working jointly with the civil service to assist us to get better outcomes in transparency and more efficient operations.

An example relating to what I have just mentioned is the establishment of the National Road Authority and the government's approval to establish the Mineral Resources Authority.

We have also introduced permanent residency for those overseas people who qualify on various grounds of commitment to PNG. Two key areas are improvement to visa and work permits processes. Indeed, we have to modernise and shake the system up a bit.

I admit we have more work to do in such areas as streamlining our work permit system. We are doing it, but it takes time to change the attitudes and cultures in any well-entrenched bureaucracy.

As regarding privatisation, we are pursuing a policy of public-private partnership. The challenge we face is enormous and we are learning as we progress.

Countries who have gone through the privatisation exercise in the past also faced similar challenges. In its various privatisation exercises, Australia too has been through it all.

I remember an airline strike that lasted a long time, more recently the demise of Ansett, the squabble over Telstra. We are going through it, give us time.

I believe given the time we have been on this path of reform we have made quantum leaps in the last two and half years.

Decades of increasing crime and bad governance have been a severe handicap to the development of Papua New Guinea. The costs are both social and economic, and my Government is determined to tackle it.

We are currently in the process of mobilising our police resources, including the support by Australia under the 'Enhanced Cooperation Program', to boost the capacity of the PNG police force to fight crime.

We are also giving priority to investigating and prosecuting major offenders in areas of corrupt practices and blatant mismanagement that provides the setting for these practices.

The oversight institutions like the Ombudsman Commission have been active in bringing to justice political and bureaucratic leaders who have breached provisions of the leadership code.

In the region, the PNG Ombudsman Commission is the most active, compared to others.

This is testimony that our law enforcing agencies, including the Ombudsman Commission are pursuing their mandated constitutional responsibilities without any interference from the community or political leaders.

Another critical challenge that we face as a nation is the strengthening of public administration in the provinces, districts, and local level governments.

The main point of service delivery is at the sub-national level.

Therefore, we are initiating a number of programmes in building capacity in the provinces and districts, including an exclusive scheme of developing a cadre of professional career officers for district and local level government administration.

My Government is determined to achieving that for nation building.

In conclusion, my Government remains committed to achieving:

· A stable investment climate;
    · An efficient, effective and affordable public sector; and

    · A competitive and dynamic private sector.

    These foundations, which are essential for growing the economy, and securing a better future for all Papua New Guineans can only be achieved through a strong strategic alliance between the Government and the private sector, including the mining and petroleum industry.

    If our primary industries are our backbone, the minerals and energy sector is certainly our lifeline.

    Thank you Ladies and Gentlemen.
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