Australia’s aid policy and Papua New Guinea: Tackling cultures of corruption

 Introductory Statement to the Senate Committee on Foreign Affairs, Defence and Trade, 22 September 2015

Dr Kristian Lasslett

The concern that my colleagues and I have with respect to Australia’s aid policy in Papua New Guinea, is that it is strongly driven by ideology and lacks a firm grounding in the empirical reality of PNG. In short, Australia’s current strategy appears to accept that aid should be directed towards creating policies and infrastructure that would make PNG a more attractive environment for business, which in turn will create the levels of growth and income essential to the country’s human development goals.

However, this aspiration needs to be tempered with a much greater acknowledgement of the market distorting factors currently operating in Papua New Guinea, which the private sector is deeply enmeshed within, rather than a remedy to.

The reality is regardless of the sector you want to name, many businesses have no intention on providing goods and services at a price that would be dictated by a healthy functioning market economy. Rather, businesses are supplying goods and services in order to charge exorbitant prices that in effect defraud the Papua New Guinea government and Papua New Guinea citizens of their finite revenues. These contracts, projects, services and goods frequently contravene the Public Finance (Management) Act, the Criminal Code, the Land Act, the Investment Promotion Authority Act and various other laws, with impunity.

For example, we have seen numerous Commissions of Inquiry launched in Papua New Guinea, led by esteemed members of the judiciary, which have reached damning conclusions about the cultures of corruption currently pervading the private and public sector.

Most recently, the Commission of Inquiry into Special Agricultural and Business Leases concluded, and I quote: ‘With corrupt government officials from implementing agencies riding shotgun for them, opportunistic loggers masquerading as agro-forestry developers are prowling our countryside, scoping opportunities to take advantage of gullible landowners and desperate for cash clan leaders’.

Of similar concern, a Commission of Inquiry into the Department of Finance found that the legal industry in Papua New Guinea was working hand in glove with state officials to settle out of court vexatious claims, for many of millions of dollars, with the proceeds being shared among the criminal conspirators.

And before that inquiry, we had the well-known Commission of Inquiry into the National Provident Fund, which in this case uncovered criminal conspiracies to defraud workers of their superannuation. Corporate managers, private sector consultants and government officials were all involved, a number of whom have been found guilty of misappropriation under the Criminal Code and sentenced to prison.

If we turn our attention to the often judicious reporting provided by the Public Accounts Committee and Auditor General’s Office we find similarly damning conclusions. For example, following an inquiry into the Department of Lands and Physical Planning, the Public Accounts Committee concluded in 2007, and I quote again: ‘The Department of Lands and Physical Planning has become an arm of private enterprise [who is] responsible for allocating Leases regardless of the Law and to the very considerable cost of the State and the citizens of Papua New Guinea’.

So it might be said, in contrast to the thrust of Australia’s aid policy, Papua New Guinea does not suffer from a lack of private sector involvement, it suffers from a surplus of private sector involvement, which has led to a breakdown of functioning markets, massive price distortion, misallocation of resources, misappropriation on a grand scale and grave human rights abuses, particularly in the extractive industries. And I should emphasise here, Australian businesses are heavily involved in the graft and abuse.

So at present Australia’s aid policy places the cart before the horse. Serious attention needs to be devoted to the delivery of aid in ways that can build capacity and environments that rid both the private and public sector of these pervasive cultures of corruption and lawlessness, that lead to misappropriation, price distortion and human rights abuse. This will require a significant investment in civil society, a sector which can legitimately claim to be desperately underfunded and weak. It is our experience that a strong civil society helps keep the public and private sector to account, in a way that can support both human development goals and markets that are more responsive to consumer needs and human rights.

This agenda will demand significant aid investment in education and capacity building at all levels, it will also require the development of new and meaningful connections with different elements of civil society, ranging from NGOs through to higher education institutions and the media. And of course, there is a deep reservoir of experience within the Auditor General’s Office, the Public Accounts Committee and the Ombudsman Commission that could be drawn on. All in all, it will require an extensive process of consultation, which is sensitive to the genuine efforts being made within the PNG government to address these issues.

In our submission to the committee, the International State Crime Initiative has attempted to the sketch some ideas for constructive paths forward that can create the type of context and environment which will ensure future investment and private sector involvement aids human development, good governance and human rights objectives, rather than hinders them. And I should emphasise these suggestions and reflections are built off over a decade of trenchant research into the criminal forms of misappropriation and human rights abuses, which I noted earlier.  Thank you.

* The International State Crime Initiative’s submission to the Senate Committee can be downloaded via this link.