Budget Reply by Bulolo MP Sam Basil on Tuesday, Nov 23, 2010

Bulolo MP Hon. Sam Basil

Mr Speaker, it is my please to present to you my reply for the 2011 Budget as the Member for Bulolo and also the Opposition.

 Let me from the outset put the record straight that the Opposition is quite skeptical of this budget ever achieving much of what it sets out to achieve.

This government has since its inception had a very poor record of never properly and effectively implementing its money plans.

Mr Speaker, year in year out, Papua New Guineans have been crying out for delivery of basic services in health, education, roads, bridges, wharves, airstrips and more but, their wishes have always been that.

There isn’t much that this government can show for the large sums of money it has purported to have spent over the years since it took office.

All our public infrastructure and services have fallen into disarray.

Our hospitals, health centers and clinics continue to struggle for the basic of drugs while people, especially the mothers, young and old, continue to die of curable illnesses whilst this Government watches.

 Building of a K500 million health facility in Bautama City can also be one of the examples of a confused government whereby the Prime Minister looses touch with his Cabinet ministers and the grassroots people.

Most of Papua New Guinea’s schools, universities and colleges have fallen into disrepair despite the allocation of large sums of money over the years, including the RESI funds which largely benefited the government members of parliament.

A very good example can be drawn from the Aiyura National High School where a relative of a very senior legislator in this parliament won the contract and misused most of the funds and the matter is now in court.

Most of the RESI funds have been expanded from trust accounts and have been misused or corruptly applied.

Our roads are all in a sorry state including our biggest investment, the Highlands Highway, which feeds all the highlands provinces which are home to some major resource projects including the PNG LNG project - we say thank you for the national highway funding.

Can the Government assure the people that the highway funding will not end up with the wantoks of ministers in the form of relatives and political cronies?

Just recently we learnt from the media that the Works Minister has allowed his wantok a contract so what is the guarantee there that the people will get real benefits from those highway funds? 

Mr Speaker, our coastal and maritime provinces continue to be neglected in terms of proper wharves, jetties and the like. 

Those that are usable are almost collapsing preventing our rural people from bringing their produce safely to the markets.

Mr Speaker, given the harsh topography and ruggedness of our beautiful country, a large part of our rural communities depend on air services to access Government services and bring their produce to the market. 

We have, on many occasions, heard the cries of our rural people for the government to allocate funds and follow through with implementation and rehabilitation and continued maintenance of our rural airstrips.

 A lot of these pleas have fallen on deaf ears for reasons only known to this Government.

The Transport Minister is already planning to spend K1.4 billion to upgrade the Jackson International Airport while this budget reflects very little to even upgrade the rural population’s very-important infrastructures such as the jetties and the airstrips.

Mr Speaker, there are so many other deficiencies in the performance of this Government to effectively manage and implement a lot of its money plans which I can continue to talk about but I do believe you all are familiar with.

We therefore strongly believe that this Government has failed miserably to implement its past budgets and we believe the 2011 money plan will be no different.

 It is our strongest conviction that this government lacks the capacity, the willpower and know-how to successfully implement the 2011 money plan.

Mr Speaker, our biggest fear is that a lot of the money that is intended for projects in the 2011 budget will be squandered as was always the case in the past.

It is therefore important that all sectors within the Government’s public service machinery be overhauled and this Government quickly put in place proper management strategies for this budget to ensure that the people of Papua New Guinea really benefit from this money plan.

Assumptions

Mr Speaker, this budget is prepared using many tested and untested assumptions that stand to be put through rigorous volatilities in the market.

The global financial crisis and its impacts may have subsided to an extent, but the global market is still quite volatile with rumblings still in Europe (Ireland and Greece) and other parts of the world.

 The weakening of the US dollar in recent times has had a positive impact on resource prices especially gold and oil but would this be sustainable?

 The Opposition will monitor this budget assumption with interest to measure its performance against set revenue targets.

Note that all may be rosy now but history has it that things may quickly turn for the worse so the onus is on the Government to monitor its assumptions on the parameters used in the budget to ensure that it achieves and implement it budget effectively.

Revenue

A big part of the budgets direct revenue is funded through incomes from resource projects either directly or indirectly apart from other tax revenues.

It will also be funded through the increases in project grants owing largely to the depreciation of the Kina against the Australian dollar and the increased funding from AUSAID.

Mr Speaker, it is also important for the government to note that this may be good but, it must also seek to encourage growth in the other revenue sectors to cushion the effects of volatility and uncertainties that surround the global commodity prices and diversify its future revenue source.

Expenditure

Mr. Speaker, the opposition notes several deficiencies in the 2011 budget and among them are some glaring issues that we will now address.

• Insufficient funds have been set aside for disaster and emergencies (disaster risk management – K 5.7m and K1.9m disaster management) despite numerous advice and warnings from experts citing a pending El Nino weather pattern that may have massive implications on the lives of a large part of the population which depends on the land for survival. It is imperative that the government plans and budgets for, not only the El Nino weather pattern but, for natural disasters which PNG is not immune to;
•  Mr  Speaker, the 2011 Budget has allocated minimal or no funding directly for upgrading of rural airstrips which serve a large part of the population of PNG that lack any other means of transport.   This is total neglect on the part of the Government to provide a vital service to the rural people of PNG.
• Mr. Speaker, the Westminster system of Government and democracies all over the world consist of and depend on a vibrant opposition to strike a balance and ensure that healthy debate on matters affecting the nation are tested and agreed to through healthy debates, government policies are properly implemented and the three arms of government are operating efficiently. The Opposition is appalled at the government’s deliberate attempt to weaken the rules that govern any democracies by its dismal budgetary allocation to the opposition. This government has again used this budget to suppress the work of the Opposition to ensure that the Government of the days is answerable to the people of Papua New Guinea through its management of this country.

Trust accounts

Mr Speaker, the Opposition believes that apart from the Sovereign Fund, all monies included in this massive budget that the government has put forward for 2011 should never be placed in trust account.

This government has had a very poor record of managing, auditing and reporting of funds held in trust accounts.

 Many a time Papua New Guineans have demanded for the Government to make public its records on the use of public funds held in trust account but to date this Government has failed miserably to make these records public.

It is common knowledge that a lot of these funds have been abused without a trace thus putting a lot of our project in jeopardy.

It is therefore imperative that this budget be managed outside of trust accounts and by the normal government accounting system as specified under the Finance Management Act so that funds are put to good use for the projects they are intended for are subjected to proper procurement and scrutiny processes to bring accountable and tangible benefits to the people of Papua New Guinea.

Inflation factor

Mr Speaker, this budget is framed so much around the LNG project but not everyone in the Papua New Guinea will benefit directly from the LNG windfalls.

It will only be the landowners around or within the project areas, the pipeline and the processing facility.

All Papua New Guineans will however feel the negative impact of this project on their lives through high cost of goods and services brought about by the LNG project. 

With high revenue comes an increase in money supply thus putting an upward pressure on inflation.

The people of Papua New Guinea are already expressing their concerns about the increased prices of basic store goods.

The sad story is that it will get worse.

For majority of Papua New Guineans, life will get harder.

For businesses, the cost of doing business will escalate which will greatly affect profitability unless these costs are passed onto the consumer.

The Papua New Guinean agriculture sector stands to suffer the most as not only will its costs increase but, increased money supply will appreciate the Kina thereby rendering our agricultural exports expensive and non-competitive on the global market.

It is therefore very important that the Government prepares to put in place a well-planned monetary and fiscal policy to manage the negative impacts on the economy brought about by inflation.

It must also plan to assist the agriculture sector, be in through increased subsidies or other assistance to ensure it survives as it is the livelihood of most Papua New Guineans.

Dutch disease

Like all major oil and gas projects all over the world, increased revenue from the LNG project and other resource sectors will increase inflows of revenue, thus causing currency appreciation making Papua new Guinea’s other exports, especially in the agriculture sector,  become more expensive,  thus reducing its competitiveness on the global economy. 

Mr Speaker, a large part of Papua New Guinea’s population depends entirely on the agriculture sector for their survival.

This situation will therefore have a devastating effect on the livelihoods of a greater part of the population of this country.

It is therefore critical that the government immediately put in place policies within the monetary and fiscal management frameworks, including subsidies to ensure that it mitigates the effects of this resource curse on the livelihoods of the rural people of this country and the population at large.

Mr Speaker, as you are aware, dependence on one particular sector of investment for any country is a dangerous trend as it exposes the country to adverse market conditions which come with a very high level of risk.

We believe in diversity of investment in all available sectors to cushion the risks that something bad may happen to the one investment or sector thereby destroying our economy.

Capacity

Mr Speaker, it is encouraging to see that the government has awoken to the fact that Papua New Guinea does not have the capacity to supply labor to the economy through the education system that Papua New Guinea inherited after independence.

It has taken the PNG LNG project for reality to sink in and remind the Government that all is not well.

In its current form, the Papua New Guinea labor market is competently unable to supply all the labor requirements not only for the PNG LNG project but, also to fill in the vacuum created by movement of people into the resource sector and new jobs created as a result of the resource boom.

Mr Speaker, the Opposition strongly believes that the initiatives current undertaken by the Government to address this labor shortage is a little too late as a lot of jobs have been lost to foreign labor and the PNG LNG construction phase has truly taken off leaving Papua New Guinea way behind.

It is sad to note that the people of Papua New Guinea have again lost out on job opportunities because the Government has failed to realise in time and plan to educate Papua New Guineans in time to capture these once-in-a-lifetime job opportunities.

 Do we always have to play catch up while our people suffer?

The Government doesn’t care Mr Speaker; maybe we all should buy houses in Cairns, catch an early flight into Port Moresby for Parliament Session and afternoon flight back into Cairns.

Yumi giamanim ol pipol istap.

Mr., Speaker, there will be a huge demand that will now be place squarely on the shoulders of this government to, not only manage this massive budget but, the large revenue windfall that will reach our shores as a result of the PNG LNG project. 

For this country to truly benefit from the developments and growth that will come with this massive revenue, Papua New Guinea will need to be able to greatly lift its implementation capacity to truly realise economic growth.

The biggest worry that most Papua New Guineans share is the capability of this government and its machinery to adequately manage this massive windfall revenue.

This Government must quickly address these capacity issues to ensure that Papua New Guinea does not fall into the resource curse that has happen in many resource rich countries.

This country must avoid at all cost from following these trends where it become a poor nation after the life of such project simple because it has failed to improve its management capacity.

Finally Mr Speaker, it has been alleged that over K5 billion of public funds has been stashed away into trust accounts which have yet to be audited.

This government owes it to its people that a thorough audit must be done quickly and made public so that the people can see how their money has been managed.

The under funding of the Ombudsman Commission, Public Prosecutor, Attorney General, Auditor General and the Police has reflected badly on the overall status of this country at the international level.

PNG has been listed as one of the corrupted countries in the world, unsafe to take a holiday and Member of Parliament are almost immune to prosecution.

Mr Speaker, the K20m allocated for the upgrading of this parliament house must be managed by the Finance Department as I have a copy of the 2010’s first quarter audit and believe me, all financial procedures has been breached.

Parliament’s operating account has been operating on a K2 million negative; therefore, nobody in this house must be trusted anymore to independently operate such funds anymore.

Mr Speaker, the Finance Minister must be mindful the performance of this 2011 budget will reflect his first budget ever as the minister responsible, therefore,  his future reputation depends on the strict management of this budged and urge him to so and commend him of his efforts so far.