Papua New Guinea's Former Prime Minister, Sir Rabbie Namaliu, says good management of the huge revenue from the Exxon Mobil-led PNG LNG project is vital if the people of Papua New Guinea are to benefit.
The PNG government is planning on setting up three sovereign wealth funds to save some of the revenue for future generations.
Sir Rabbie says the funds could have an immediate positive economic impact, as well.
Presenter: Jemima Garrett
Speaker: Sir Rabbie Namailu, former Papua New Guinea Prime Minister
NAMALIU: Papua New Guinea is going through an unprecedented period of economic growth. Obviously that is being spurred by a number of significant projects namely the LNG project but obviously by projects in the mining sector as well as in the non-mining sector area. So we are going through a significant period of economic boom and one that is likely to be around for the next few years.
GARRETT: The government says that if it is managed well it could ultimately give Papua New guinea its economic independence - what is your assessment?
NAMALIU:I think so. That's the key. The key is management. How that is done by the government of the day is absolutely essential to ensuring that the country benefits. That the people of this country see some tangible benefits from this development, particularly in areas like health and education, infrastructure: all of those things require a significant degree of resources to make sure that we make up for lost time, basically.
GARRETT: How important are the proposed sovereign wealth funds for Papua New guinea's future?
NAMALIU: Extremely important because, I think, with increased inflows that will have a huge bearing on economic and especially monetary policy so that has got to be managed properly in ways that increased inflows of revenues coming in don't have significant adverse impact on things like interest rates, inflation and on a whole range of economic indicators. That is why setting up a sovereign wealth fund will help to cushion the impact of increased revenues coming in and I think the government is on the right track, not only to do that but to make sure that we avoid what is often referred to as the 'Dutch disease' which has been demonstrated in some countries where countries have gone through a similar period of growth and if you do not manage it well it could have enormous adverse economic consequences.
GARRETT: The government wants to make the sovereign wealth funds tamper-proof by enshrining them in an organic law. How would that work exactly?
NAMALIU: How it would work if it is to be an organic law is that it wouldn't be that easy to amend the law on the floor of parliament as opposed to an ordinary law which would require a simple majority of a quorum, for instance of 37 in our case. But if it is an organic law you would obviously have to ensure that you have at least an absolute majority, more likely to be more, usually around 72 or thereabouts, so you can't just fiddle with the law as you wish, as has been the case in some situations, and I think that is the appropriate approach, as well, because once you have created an instrument like that it is important that you protect it in ways that people won't lay their hands on it, simply to have access to the funds to do things, especially for things that were never intended to be funded out of that fund.
GARRETT: The government has to meet a tougher standard to create an organic law. With the election coming up how do you rate their chances of getting it through before the election takes place?
NAMALIU:I think it should get through. The government has got the numbers on its side and I think everyone is pretty much agreed it is essential to set it up so I think there is an expectation out there amongst the public that this law will be enacted before the election.
(SOURCE: RADIO AUSTRALIA PACIFIC BEAT/PACNEWS, http://www.pina.com.fj)
The PNG government is planning on setting up three sovereign wealth funds to save some of the revenue for future generations.
Sir Rabbie says the funds could have an immediate positive economic impact, as well.
Presenter: Jemima Garrett
Speaker: Sir Rabbie Namailu, former Papua New Guinea Prime Minister
NAMALIU: Papua New Guinea is going through an unprecedented period of economic growth. Obviously that is being spurred by a number of significant projects namely the LNG project but obviously by projects in the mining sector as well as in the non-mining sector area. So we are going through a significant period of economic boom and one that is likely to be around for the next few years.
GARRETT: The government says that if it is managed well it could ultimately give Papua New guinea its economic independence - what is your assessment?
NAMALIU:I think so. That's the key. The key is management. How that is done by the government of the day is absolutely essential to ensuring that the country benefits. That the people of this country see some tangible benefits from this development, particularly in areas like health and education, infrastructure: all of those things require a significant degree of resources to make sure that we make up for lost time, basically.
GARRETT: How important are the proposed sovereign wealth funds for Papua New guinea's future?
NAMALIU: Extremely important because, I think, with increased inflows that will have a huge bearing on economic and especially monetary policy so that has got to be managed properly in ways that increased inflows of revenues coming in don't have significant adverse impact on things like interest rates, inflation and on a whole range of economic indicators. That is why setting up a sovereign wealth fund will help to cushion the impact of increased revenues coming in and I think the government is on the right track, not only to do that but to make sure that we avoid what is often referred to as the 'Dutch disease' which has been demonstrated in some countries where countries have gone through a similar period of growth and if you do not manage it well it could have enormous adverse economic consequences.
GARRETT: The government wants to make the sovereign wealth funds tamper-proof by enshrining them in an organic law. How would that work exactly?
NAMALIU: How it would work if it is to be an organic law is that it wouldn't be that easy to amend the law on the floor of parliament as opposed to an ordinary law which would require a simple majority of a quorum, for instance of 37 in our case. But if it is an organic law you would obviously have to ensure that you have at least an absolute majority, more likely to be more, usually around 72 or thereabouts, so you can't just fiddle with the law as you wish, as has been the case in some situations, and I think that is the appropriate approach, as well, because once you have created an instrument like that it is important that you protect it in ways that people won't lay their hands on it, simply to have access to the funds to do things, especially for things that were never intended to be funded out of that fund.
GARRETT: The government has to meet a tougher standard to create an organic law. With the election coming up how do you rate their chances of getting it through before the election takes place?
NAMALIU:I think it should get through. The government has got the numbers on its side and I think everyone is pretty much agreed it is essential to set it up so I think there is an expectation out there amongst the public that this law will be enacted before the election.
(SOURCE: RADIO AUSTRALIA PACIFIC BEAT/PACNEWS, http://www.pina.com.fj)
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