Australian silence on graft helps explain why aid is not working

Australia's Foreign Minister failed to confront PNG's culture of corruption and conflict on his recent visit, says Paul Cleary writing in The Australian

THE visit to Papua New Guinea last week by Foreign Minister Stephen Smith highlights the disturbing incapacity of the Port Moresby government to cope with the mounting challenges it faces, and Australia's refusal to confront a culture of corruption and conflict that is tearing the place apart.

Some of what Smith announced during the visit says a lot about the collapse of government service delivery in the poverty-stricken country.

But Smith's refusal to even mention the need for measures to address the real threat of greater corruption and conflict flowing from a $US15 billion ($17.1bn) liquefied natural gas project marks a disturbing outbreak of foreign policy weakness on Australia's part.

One of the announcements made by Smith involved $50 million in aid to churches in PNG to deliver "crucial health and education services to the poorest and most disadvantaged people in remote areas".

The initiative, while no doubt worthwhile, is an admission that the state of PNG has become so dysfunctional that it cannot deliver services on the ground to its poorest people, despite a high level of public spending.

Increasingly, basic health and education services are delivered by churches, non-government organisations and even oil companies. To cite one example, the Australian- and PNG-listed Oil Search provides about 40,000 outpatient consultations through its network of eight clinics to people in the remote southern highlands. Mothers go to the clinics to have their babies because they don't trust the local hospital.

But nothing in Smith's public statements during the visit addressed this appalling state of affairs. He talked about how Australia needed to be more focused on tackling poverty in the country. There's nothing new in this. In fact it was the finding of a report commissioned by Smith's predecessor, Alexander Downer, back in 1997.

But the glaring omission in what Smith and Assistant Treasurer Nick Sherry had to say during the visit concerned measures to fight corruption stemming from the neatly named PNG LNG gas project, which is led by the giant ExxonMobil together with Australia's Oil Search and Santos.

Last year, the Australian government persuaded PNG to consider adopting an anti-corruption regime known as the Extractive Industries Transparency Initiative. A committee in the PNG Treasury was set up to consider joining it.

This program is designed to produce a set of double accounts showing what the government receives from oil companies, and what the companies pay. It is aimed at stamping out corruption in resource-rich developing countries. Launched by then British prime minister Tony Blair in 2002, EITI has gained the in-principle support of 32 resource-rich nations, with PNG a notable exception.

Yet after persuading PNG to consider the plan, Smith and Sherry were silent on the issue during their visit. There was no mention of it in their joint statement, nor in their press conference with PNG Foreign Minister Sam Abal.

Smith and Sherry noted that some progress was being made in designing sovereign wealth funds to manage the revenue, but without EITI there is no guarantee that kickbacks won't be made and that revenue won't be siphoned off.

The lack of any emphasis on EITI and corruption generally suggests that PNG's grand chief, Prime Minister Michael Somare, may have gone cold on the idea.

A DFAT spokesman on Friday said that several elements covered in last year's joint understanding between PNG and Australia "were not mentioned" in the statement after this week's meeting, nor in subsequent comments by Smith. But the spokesman claimed that EITI remained on the agenda.

"This should not be taken to mean in any way that these elements do not remain important, or that work is not being undertaken on furthering commitments made in regard to these elements. All mutual understandings and commitments made under the joint understanding are ongoing. In relation to the Extractive Industries Transparency Initiative, Australia continues to support PNG's implementation of the initiative."

PNG businessman Peter Aitsi, who chairs the PNG branch of the anti-corruption group Transparency International (TIPNG), warns that the LNG project will fan corruption and conflict in the country.

He told The Australian it was already "causing wars amongst our landowners".

He says the project highlights the "inability of the government to engage meaningfully on this matter" as it lacks the capacity to manage and regulate the development process.

"Exxon has an endless supply of resources and expertise pitted against a weak government, which can't even deliver its own services," Aitsi said.

Exxon is pushing the government to expedite negotiations with landowners to secure access rights to land for the construction of the pipeline and the LNG plant.

"The government is giving away concessions to landowners, tying up public money in that," Aitsi said.

But the process was leading to conflict within and among various landowner groups.

Aitsi said TIPNG had been lobbying the government to become part of EITI, adding that the government had recently set up a taskforce within the Treasury. "Given the large influence of the LNG project, we'd like to see a higher level of transparency," he said.

Not that Smith's visit added any support to the courageous work of the TIPNG and people such as Aitsi.