Papua New Guinea’s development performance since Independence

1. Papua New Guinea’s development performance since Independence

2. Measuring development • A subjective term • Difficult to quantify - ‘quality of life’, ‘well-being’ • Development is multi-dimensional • Broader than GDP or economic growth • GDP growth may be a necessary pre-requisite but other development outcomes do not automatically follow • Social, political, environmental aspects • Need measures appropriate for PNG • Limited by data quality and availability • Differences between urban/rural, income levels, Provinces, Regions not captured

3. NRI’s approach • Engagement of academics and experts to prepare discussion papers • Analysing 5 year time frames • Identifying strengths and weaknesses of past policies and approaches • To move forward, we must understand past performance in key policy areas and draw from the lessons of the past • Cannot look at policy areas in isolation - it is important to understand the linkages

4. Report Outline • Overview • Measuring PNG’s Development Performance • Development Planning • Fiscal Policy • Monetary Policy • Politics and Governance

5. Key events and dates

6. Key events and dates

7. Key events and dates

8. GDP per capita and Real GDP Growth Source: PNG National Budget Documents, various years

9. Government Revenue, Expenditure and Budget outcome Source: IMF Government Financial Statistics

10. Total Government Debt - Domestic and Foreign Source: PNG National Budget Documents, various years

11. Government expenditure by sector - Infrastructure, health, education, other Source: IMF GFS, PNG Budget Documents, various years and author calculations

12. Social development - A snapshot PNGFiji Solomon Is ( - ) (2006) (2006) (2006) Life expectancy 49 57 69 63 (1997) Primary school 65%55% 100% 100% enrolment (Gross) (1991)(2005) Childhood 32%75% 81% 91% Immunization rate (1980) (DPT) Infant Mortality 9754 16 55 rate (per 1000 (1975) live births Source: World Bank World Development Indicators 2008

13. Life Expectancy (At birth)

14. Adult literacy rate ( 15 + years %)

15. Fiscal policy • Commodity booms and strong revenue growth • But not capitalised on • Poor fiscal discipline • Sustained deficits, Government borrowing, high public debt, donor funded bail outs, crowding out of private sector • Poor budget decisions - not adhering to plans • Inadequate funding of health, education and infrastructure • Inefficient public service - poor capacity to implement plans • Failure to implement reforms

16. Fiscal policy - lessons • Moving in the right direction (since 2002) • Introduction of Medium Term Fiscal Strategy • Reduction of debt • Improvements in budget allocation toward priority areas • Challenges • Avoiding budget deficits and Government debt • Ensuring Government expenditure leads to development outcomes (economic and social development priorities) • Strengthening accountability and transparency • Removing constraints to private sector growth and creating appropriate fiscal environment - diversifying economic activity

17. Monetary policy • Increasing sophistication of monetary policy instruments • Fixed exchange rate (Hard Kina policy) not sustainable • Government overspending, financing of debt, insufficient foreign reserves - donor funded bail outs • Exchange rate floated in October 1994 • Changing monetary policy goals • Pre 2000 - economic growth (by encouraging credit growth) • Post 2000 - price stability (keeping inflation, exchange rates stable) • Monetary policy shaped by external factors (world prices) and poor fiscal discipline by Government

18. Monetary policy - lessons • Moving in the right direction • Independence of BPNG • Price stability in recent years (prior to 2008) • Better fiscal management • Challenges • Monetary policy must work together with fiscal policy • Continuing fiscal discipline • Maintaining and adhering to sound monetary policy practices • Reducing import reliance (imported inflation) • Reducing damaging effects of domestic debt financing (crowding out of lending to private sector; inflation; import spending and reductions in foreign reserves)

19. Development Planning Observations Six development plans in PNG since independence Common objectives and themes Economic growth Equity and participation Some accompanied by resource frameworks 19

20. Development Planning - lessons Past plans have not achieved their goals due to: Vague objectives Not supported by more specific strategies Poor implementation Lack of ownership and capacity Inadequate allocation of resources Frameworks poorly adhered to or non-existent Poor links to other plans Sectoral, provincial, local Lack of monitoring Insufficient data collection, quantifiable indicators and targets not set 20

21. Politics and governance • Constitution developed in preparation for Independence • Political instability • Votes of no confidence - 12 changes of Government • Coalition governments by necessity • A democracy - but not fully realised • Decentralisation • Power play and confusion of responsibilities between levels has reduced level of basic service delivery • Political instability not conducive to long-term investment

22. Politics and governance - lessons • Moving in the right direction • Improved political stability - OLIPPAC • Challenges • Public sector management • Transparency and accountability, legal framework • Clarifying responsibility for service delivery - between levels of government, sectors and organisations • Political governance • Free and fair elections • Well functioning Parliament - sittings, Committee system, scrutiny of legislation, public debate, absenteeism • Women in Parliament • Strengthening of political parties and policies

23. Conclusion • Economic growth insufficient to impact households • Poor performance on social indicators - particularly compared with other Pacific countries • Absence of quality data or indicator framework for PNG • Development plans have existed, but not well resourced, not linked to other plans and poorly implemented • Lack of fiscal discipline - overspending, unproductive spending, not adhering to planned priorities • Reliance on minerals and agriculture - need to diversify to reduce economic shocks • Political instability and poor governance have hampered PNG’s development performance and led to a decline in basic services

24. Thank you