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- Justin94360 - 02-26-2012
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PNG on the Fly
PUBLISHED: 24 Feb 2012 00:05:00 | UPDATED: 24 Feb 2012 14:41:16
http://afr.com/p/afrmagazine/png_on_the_fly_DbLUnAQm9i95bjRaPY3f4I
TONY WALKER
Kostas Constantinou uses a word you don’t hear much to describe the business environment in a country that sits – largely ignored – just over the horizon to our north. “Papua New Guinea had been in a lull for the past 15 years when all of a sudden ‘whoosho’,’’ says one of PNG’s richest men. Educated by the Christian Brothers at Nudgee in Queensland, Constantinou has interests in banking, construction, property and hotels across the Pacific. Whoosho indeed.
I interview him in offices adjacent to his Lamana Hotel in Port Moresby, a hub for tourists and business people in a city that is jumping out of its skin rewarding buccaneers profiting from PNG’s riches, but one that takes its toll on risk-takers. Constantinou’s father, Sir George Constantinou from a Greek Cypriot family that came to PNG last century to make its fortune, was killed in late 2008 in a Port Moresby car-jacking when he resisted attempts by a gang of marauding youths to separate him from his Mercedes.
Raw and chaotic, Port Moresby and its remarkable hinterland has become the Klondike of the Pacific, the centre of a modern-day resources boom that is straining the country’s ability to cope and making people like Constantinou rich in the process. That rawness reveals itself during an assignment in PNG that takes me first to Port Moresby, then to New Britain in the north and, finally, by charter flight and helicopter to the upper reaches of the Fly River in Western Province towards the border with Irian Jaya.
During this time, PNG experiences a constitutional crisis in which rival leaders jostle for power, prompting fears of blood in the streets. On top of that, the country is shaken by an earthquake measuring 7.3 on the Richter scale. PNG’s location on the volcanic ‘Pacific Ring of Fire’ seems an apt metaphor for problems more generally. This is a country of enormous promise, of jagged opportunities, of incredible grandeur, of impressive people – and huge development and governance problems. Over three weeks, I talk to dozens of Papua New Guineans – from shanty town dwellers to prime ministers and people from many different backgrounds in a country that is both resource-rich and dirt poor at the same time.
Talk of corruption among public officials is a staple of dinner-table and bar-room conversion. Transparency International rates this as one of the world’s most corrupt places. Joseph Kanekane, director of the PNG Law and Justice Sector, a quasi government body aimed at improving civil society, defines corruption in the PNG context in a way that makes sense. “We don’t have a money problem in this country, Tony, we have a management of the money problem,’’ the articulate Kanekane says over lunch one day.
PNG Prime Minister Peter O’Neill: “...confident the windfalls of the resource boom will be managed much better than in the past.”
Photo by Nic Walker
PNG’s ‘money problems’ mean that government institutions barely function through lack of funds that have been siphoned off by corrupt officials for their own use – or those of their tribe. The problem is so pervasive that few layers of government have been left untouched. Thomas Webster, the respected director of the government-funded think tank, National Research Institute, puts things into perspective when he says that annual audits of government departments mandated by law are simply ignored. “There is a complete lack of discipline in the processes of government. This enables corruption,’’ Webster tells me over dinner.
And all this against a background of a country that is awash with billions of dollars of investment in resource development and exploration. If under-explored Africa is a new frontier for resource companies, PNG is a Pacific equivalent. The country’s resource riches – which include minerals and energy, timber, coffee, rubber, cocoa, copra and palm oil – are sucking in mainland Chinese investors; Malaysia logging interests are scarring the country and greasing politicians’ palms in the process; and Australian, American, Canadian and Japanese prospectors are flooding into the country in pursuit of riches. Our nearest neighbour, our former trust territory, recipient of much Australian assistance over the years, is transforming itself in ways that demand we sit up and take notice.
Framing my own perceptions is a narrative Australians absorb from childhood. PNG provided a buffer against the Japanese advance in the Pacific. Damien Parer’s striking images of ‘Fuzzy Wuzzy Angels’ stretcher-bearing wounded Australian diggers at Kokoda have become part of the national consciousness. My own father served at Milne Bay, which is undersold by comparison with the iconographic Kokoda as the more decisive battle of the Pacific War. For these and other reasons we feel we owe PNG, but the question, as always, is how to redeem such an obligation.
Australian aid and investment is one way, but this can be double-edged. Take the Ok Tedi mine in the Western Province which remains PNG’s greatest revenue source. It transferred something like $3 billion in taxes to the central government over the period 1984-2011, plus dividends. The mine produces about 1 per cent of the world’s copper and is among the top dozen or so producers, making it a significant operation by any standards.
At the same time, Ok Tedi, named for the river on which it is located, is an environmental sink, spilling millions of tonnes a year of tailings impregnated with chemical by-products downstream to the Fly River, which meanders in great coils from its catchment in the western highlands to the Torres Strait. BHP exited the project in 2002 citing environmental outcomes that were incompatible with its standards.
Tabubil, the township that services the Ok Tedi mine, is the second-wettest place on earth, adding significantly to the difficulties of managing waste from the vast mine site above the town. The collapse of a tailings dam bearing residue from mining activities, including a processing facility, contributed to the silting of the Fly downstream and dieback on its banks.
We travel to Tabubil, several hours west of Port Moresby by charter as a guest of the mine’s present owners, the PNG Sustainable Development Program and the State of PNG, to observe efforts to mitigate environmental damage and also to be briefed about the company’s contribution to regional development. Efforts to redress the damage are impressive and include a huge dredging program at Biga just below where the Ok Tedi flows into the Fly. This is trapping about 85 per cent of the 30 million tones of tailings and waste that washes annually into the river, according to Michael Ridd, the mine’s environmental officer.
Plans to extend the mine life beyond the end of 2013 render efforts to do something about the waste more pressing, or risk what may become the permanent destruction of a corner of the country that represents a fragile and immensely valuable eco-system. Shaven-headed, no-nonsense chief executive of Ok Tedi, Nigel Parker, says the company is “scouring the world’’ for technology that would enable the reconstruction of a tailings dam that could withstand the enormous weight of fluids that bear down in a monsoonal environment in which it rains almost every day.
What happens at Ok Tedi has implications for mining operations across PNG, sensitising local people to the risks involved and spawning litigation that is vastly complicating what had been a relatively uncomplicated legal environment for resource companies. Xstrata, for instance, with its proposed Frieda copper/gold project across a mountain range from Ok Tedi, is not alone among international miners encountering local resistance to development plans.
Land rights arguments fester in a raw – and unpredictable – legal environment. In Port Moresby, lawyer Peter Donigi, convener of the PNG Customary Land Rights Holders Party, has laid the ground for a plethora of lawsuits contesting ownership and compensation. Needless to say Donigi is regarded by the mining fraternity as a “pain in the arse”. “Australia is only interested in extractive industries; it’s not really interested in long-term investment in the country,’’ he says. This may – or may not – be true, but Donigi’s perspective reflects a certain resentment that tells you Australian interests cannot take a hitherto privileged position in PNG for granted. Walking one evening in Nigel Parker’s well-tended garden overlooking the Ok Tedi, I ask whether it pains him to see the river in its present state, resembling not a fast-flowing stream, as it was for millennia, but a silt and waste-filled tributary. “Yes, it does,’’ he says, noting that silting had raised the riverbed five to 10 metres.
A few days later, we take a helicopter ride several hundred kilometres down the Fly to Lake Murray, where the Ok Tedi Development Foundation is experimenting with barramundi-farming in several pilot programs to provide local employment (and at the same time demonstrate that pollution in the river’s upper reaches is not affecting marine life downstream). One of those selected to operate a pilot farm is Sep Galeva and it turns out there is more to Galeva than our Ok Tedi minders had factored into their calculations.
He is grateful for the opportunity to develop a small local industry and proud of the progress of his barramundi fingerlings, but he is also critical of mining operations and their impact on the environment. It turns out he is a candidate for the PNG Greens Party at forthcoming national elections and has been at the forefront of a successful local campaign to stop Malaysian logging interests carving their way through nearby forests. “It may be too late,’’ Galeva tells me. “They could have done better,” he says of Ok Tedi’s environmental mitigation efforts. “They needed to be more honest in advance [about environmental risks] but at least they are putting something back to keep our children and grandchildren going.’’
Galeva hunts local animal species such as the cassowary with a bow and arrow. He says the birds are becoming rarer because of intrusions into a pristine environment. He reserves particular scorn for corrupt local politicians who have plundered a province that should be the richest in PNG but is the poorest, according to development indicators. “We’ll have a civil war in the next 10-15 years if our leaders don’t do something about corruption. People will fight for their rights.”
Fly-in, fly-out
The upper reaches of the Fly are a world away from Port Moresby, which has become the way-station for a new globalised breed of skilled and semi-skilled workers who wash in and out of the country in their thousands. At the Gateway Hotel in Port Moresby adjacent to the airport, short-stay ‘fly-in/fly-out’ tradesmen – Australians, South Africans, New Zealanders and Irishmen, among others – clunk through the hotel lobby in their work boots en route to a raucous basement pizza bar. “This place [PNG] is a shit-hole; everything’s a battle here,’’ says Adelaide-based Craig, who is involved in energy exploration in the Highlands.
The Gateway is a hard-living, hard-drinking transit stop on the way to multiple resource projects. Thirty-six years after the country gained its independence, the story is far from positive. That’s despite all this mining activity and the injection of $15 billion of Australian aid and similar amounts collectively from other donors to help arrest PNG’s further slide down the development table, already marked by a defunct health system, broken schools, and fractured infrastructure.
“The Australian aid program is a bloody failure, mate,’’ Mal Smith, governor of Goroka in the highlands, operator of a successful helicopter charter company, says bluntly. Australian aid officials concede that a good deal of money has been wasted in ‘service delivery’’, but argue that challenges abound because of an undeveloped infrastructure, a malfunctioning and corrupt bureaucracy and security problems. Increasingly, Australian aid is being channelled through private non-governmental organisations or in direct assistance that seeks to bypass the ‘system’.
Meantime, the affable manager of the Gateway and a 16-year veteran of the hotel business in PNG and elsewhere in Asia-Pacific, Matthew Cooper finds himself in the frontline of a resources boom with occupancy rates through the roof, and room charges that match those of Tokyo, London and New York. “I have never seen anything like this,’’ he says. Revenue per room, the professional measurement used by hoteliers to assess their business, has more than doubled in the past five years as demand for accommodation in the capital outstripped supply. Occupancy at the Gateway, for example, is running at 93 to 94 per cent, close to being a full house.
The explanation for all of this lies in the demands being exerted on a creaking PNG infrastructure by projects like the $15.6 billion PNG LNG venture that will come onstream in 2014 and, in the process, transform the local economy. PricewaterhouseCoopers estimates that in 2015, the first full year of LNG production, PNG’s economy will grow 21.1 per cent, up from 6.5 per cent growth in 2014, representing a once-in-lifetime jolt. Exxon Mobil is majority stakeholder in the project, along with local, Japanese and Australian interests, including Oil Search and Santos, which will hold 29 per cent and 13.5 per cent in the project respectively.
“People in Australia have no idea how big business is up here,’’ Peter Botten, Oil Search’s chief executive says on the fringes of a packed minerals and energy conference at the Gateway where many different nationalities mingle with local officials. You might not have seen the colour of money wafting out of this event, but you could certainly smell it. Numbers are impressive here. Over the LNG project’s life it will produce 9 trillion cubic feet of gas, doubling PNG’s gross domestic product to $6 billion per year. It will deliver something like $40 billion in revenue to the government and local landowners over 30 years and the hope is these riches will be used wisely.
‘Used wisely’ is the operative phrase because of the corruption and mismanagement that have been a hallmark of post-independence PNG, in which the few have been enriched at the expense of the many. The chief executive of the Port Moresby Chamber of Commerce, David Conn expresses a fairly standard concern about the present good fortune when he says: “I don’t think they’ll get this chance again.”
PNG leaders would not disagree with Conn’s assessment that the country needs to make the most of its advantages or risk becoming a failed state. Acknowledging this, PNG has legislation before parliament to establish a sovereign wealth fund to administer resource riches and, in the process, provide a mechanism to keep the proceeds out of the hands of corrupt politicians and bureaucrats. “We are doing this through parliament so we have a firm grip on the institutions we are creating that will manage the windfalls we will receive as a result of this resource boom,’’ Prime Minister Peter O’Neill tells me. “I am very confident the windfalls we get out of the resource boom will be managed much better than we’ve been able to do in the past.’’
Former prime minister, now Minister for Public Enterprises, Sir Mekere Morauta puts the issue arrestingly when he says: “Many of us have been too busy cutting down the branches of the tree instead of examining the roots.’’ By this, he means that PNG’s leaders have paid insufficient attention to what he would describe as ‘governance’ issues.
He is eloquent on the subject of whether PNG, with its 1000 tribes and 800 dialects, is governable (around a quarter of the world’s languages reside in the country, necessitating the use of pidgin as a lingua franca:. “Our problems, including corruption, are like mangroves growing into each other. ’’ says Sir Mekere. “Unless we disentangle, the buttressing roots problems will become mutually reinforcing: one day we’ll run out of options.’’
PNG old hand Ross Garnaut agrees. The chairman of both Ok Tedi Mining and the Papua New Guinea Sustainable Develoment Program remains an optimist from his early days as a professor of economics at the University of Papua Guinea and as an overseer of post-independence PNG’s financial and economic system. But he acknowledges the challenges. “This is the first time since independence that PNG has had a real increase in resources available to it. It’s critical these are well managed and well utilised,’’ he says in one of a series of phone calls and meetings.
People may associate the former ambassador to China with his role as economic adviser and strong advocate for tariff reform in the Bob Hawke government, and more recently with climate change, but PNG remains a core interest. He oversees a $1.2 billion sovereign wealth fund-by-another-name managed offshore, beyond the reach of the sticky fingers of local officials who might have wasted BHP’s legacy. BHP Billiton vested its 52 per cent share in Ok Tedi for the benefit of PNG. The program is involved in funding education projects, timber cultivation, logging and processing to demonstrate the possibilities of downstream production, and energy projects in partnership with, among others, Origin Energy, in the delivery of hydropower to remote areas.
Garnaut does acknowledge the risks of things going awry, but draws a contrast between post-colonial countries of Africa such as the Congo, which have succumbed to dictatorial rule and have been torn apart by tribal conflict. “This has been a constant struggle by a lot of able and well-motivated Papua New Guineans who have been prepared to put themselves on the line to fight formidable problems,’’ he says.
‘Cusp’ is a word a number of prominent Papua New Guineans use to describe this current stage of development, and former prime minister, Sir Rabbie Namaliu is one of them. “We’re on a cusp, depending on what our leaders make of it,’’ says Sir Rabbie, now a board chairman and director of a number of companies, including Bougainville Copper. “If they can seize the opportunity to take us to the next stage, we can actually transform this country. It couldn’t be a better time to do something about education and health and rehabilitate our infrastructure. We could actually be a very wealthy country.’’
Such a statement rather ignores what may well prove PNG’s biggest challenge. Demographically, the country is a time bomb. Its population is now around seven million (give or take a few hundred thousand, given the difficulties involved in conducting a census and lack of literacy – just 21 per cent of an adult population can read and write). By 2040, it will have as many people as Australia does now. This makes it all the more surprising that PNG is devoid of any significant public campaign to arrest an annual 2 per cent population growth that is among the world’s highest. During a fairly lengthy stay, I did not see one hoarding or one television commercial advocating smaller families. When I ask Sir Mekere Morauta why, he is stumped for an answer: “It just never gets talked about. As a consequence, everyone is poorer.’’
One person who does acknowledge the problem is Laura Bailey, the World Bank’s chief representative in PNG and a believer in the country’s prospects. “No one has factored family planning into the planning process,’’ Bailey tells me in her Port Moresby office. “It’s not discussed in a candid way in a country that prides itself on being religious. The problem is simply not part of the public discourse.’’
The demographic issue also reflects itself in the appalling inequalities of wealth and poverty. As Bailey puts it: “This is a country of dramatically improving wealth, but depressing social development indicators. National wealth is not transforming itself into social development. It’s simply not happening.’’ PNG has the highest incidence of AIDS in the Pacific. Something like 10 per cent of the adult population is infected, according to some estimates.
Resentment among the dispossessed is building against a Chinese influx, many of whom are operating small businesses that locals believe should be reserved for them. A taxi driver who ferried me around Port Moresby talked about a surge in arrivals from mainland China. “They come from nowhere. They come and do business which we’re supposed to do,’’ Larsen says, reflecting suspicions that venal officials have facilitated the entry of thousands of Chinese in contravention of immigration restrictions.
No reliable statistics exist as to actual numbers of Chinese arrivals, but these newly-arrived small merchants are numerous. They also represent a significant problem for a well-established PNG-born Chinese community, which has been made to feel insecure by the antagonism directed at Chinese generally. ‘Brendan’ (not his real name) is one of PNG’s most successful Chinese businessmen who was born in the country of parents who arrived from China before World War II. He is both nervous and critical of the new arrivals. “They carry guns; they might shoot me,’’ he says. “I don’t know how they got here, but it’s bad for us.’’
You sympathise and are not surprised when Brendan tells you his wife has established a home in the Sydney suburb of Chatswood. Well-heeled Papua New Guineans have established bolt-holes in Australian cities from Cairns to Brisbane to Sydney – just in case. This is a country whose future trajectory is precarious and at least some believe that strengthening the system of government by finally addressing the issue of corruption is the only way forward.
The installation of Peter O’Neill as new Prime Minister, by a parliamentary vote back in August, may offer that hope. In the turmoil surrounding those events, the Supreme Court found that constitutional procedures had not been followed, but an O’Neill-led parliamentary majority faced down the court and an initial decision by Governor-General Michael Ogio to re-install Michael Somare.
ONeill, who along with his deputy prime minister Belden Namah is accused of using public office to enrich themselves, acknowledges the problem while asserting he is committed to cleaning up the government with the creation of a commission against corruption. “That will enable a more vigilant fight against corruption in this country,’’ O’Neill insists. “I believe strongly the people are responding to our commitment that this government is intent on fighting corruption which has been crippling this country for quite some time.’’
In the meantime, there’s money to be made, lots of it in a business environment that is not as bad as some would have it, according to Rob Allport, chief executive of Credit Corporation, a Port Moresby-based diversified financial services company. He is not alone in his complaints about the depiction of PNG as a lawless environment in which more or less anything goes. “The thing that annoys me most is that the media focuses only on the sensational,’’ Allport says in his shiny new office building near the city centre.
Allport is quick to point out that the Port Moresby stock exchange has been one of the better performers in the past year in contrast to lacklustre Australian markets. “Personally, I think Australian business is missing out on a lot of opportunities up here because of these misperceptions. Obviously, we’ve got problems, but they’re not as bad as they appear. A lot of people think it’s the Wild West, but we find it quite easy to do business up here.’’
Kostas Constantinou certainly thinks so. Despite his father’s murder, Constantinou remains upbeat even while he acknowledges the difficulties. “It’s not easy. It’s not a walk in the park,’’ he says. For PNG in this latest period, no less than in Australia, we better hope it continues to be ‘whoosho’, and that some of that boon is applied to solving the country’s problems, including dealing with the startling fact of there being fewer than 400 doctors in a country of seven million, according to the World Bank. Otherwise, PNG really is at risk of going down the gurgler.
- Justin94360 - 02-26-2012
From the same publication here is a photo video of O'Neil talking about some of the issues in PNG. I couldn't view it from the main page
http://afr.com/p/world/video_png_prime_minister_peter_neill_U6roUTtcGFc9qHODUYVQ4K
but got to it via
http://tv.afr.com/video/channel/122/221799?play=1
Not a great deal of information but think he comes across very well.