Oxford Business Group

In line with an electoral platform that pledged to deliver more local level services and control over spending, the national government of Papua New Guinea (PNG) has introduced a budget for 2013 that transfers nearly PGK1.5bn ($623m) to provincial, district and local authorities.

Each province is expected to receive PGK5m ($2.08m) per district, while districts will be directly allocated PGK10m ($4.15m) and local governments PGK500,000 ($208,000). The government has set up guidelines for spending, with 30% of funding committed to infrastructure, 20% each to education and health care, and 10% each to law and order, support for economic activities, and administrative issues such as tendering. In total, the amount of funds transferred represents an 87% year-on-year increase in support for sub-national programmes.

Prime Minister Peter O’Neill told OBG, “Local communities will now have more control over decision making and the implementation of development projects. These efforts combined will help to ensure the country’s continued economic and social health.”

The central government will retain final approval for larger projects, but funding will now be in the hands of sub-national authorities. This has raised some concerns, as Treasury Minister Don Poyle conceded in a speech in late 2012, but he noted that the government had carefully considered the risks, as well as strengthened accountability and auditing systems.

Oversight could prove difficult, but there is little doubt that the shift in responsibility will expedite project approvals and funding disbursement to sub-national authorities. According to a World Bank analysis, the central government’s record of disbursement of development funds has been poor and uneven in recent years, with more than 50% of spending crowded into the fourth quarter of each year between 2008 and 2012, which suggests difficulties in project planning, implementation and execution.

While the new system may bring improvements, challenges remain. For example, the uniform allocation of funding does not take individual region’s needs and capacities into account. Cross-district planning may provide further complications.

A raft of reforms is billed for this year that will help the government deliver on its policy commitments. The first step has been to make ministers, rather than public servants, responsible for meeting policy goals. The government has also formally adopted the 2001 Government Financial Statistics accounting system, and a stringent and integrated planning and approval process has been outlined, including monthly reports and quarterly audits.

Crucially, the government has rolled out a multi-year budget that combines recurrent and development spending, which will enable central and provincial administrations to plan activities with greater predictability. This will be important, as the government’s financing requirements peak at PGK6.5bn ($2.7bn) in 2014, before dropping to PGK3.4bn ($1.41bn) by 2017.

Proposed projects will also need to be aligned to the five-year and medium-term development plans. Representatives at every level from district wards to provincial governors will be responsible for ensuring applications are in line with national priorities, and that all procedures are being followed.

Provincial and district equivalents of the national government’s Central Supply and Tenders Board (CSTB) will assume responsibility for approving projects valued at less than PGK500,000 ($208,000). This is expected to reduce pressure on the under-resourced CSTB, which is awaiting further support in the coming years.

While the move to locally administered funding is progressive and represents a considerable advancement for empowering local governments, it is not yet a cure-all. Delivering local-level services remains difficult, exacerbated by both capacity shortfalls and the difficulties of administering 7m citizens scattered across numerous islands. Many regions are several days’ journey from central and even provincial service centres. Beyond key urban centres, PNG’s baseline levels for education, literacy and health are low by global benchmarks. These are challenges that the government can make substantive inroads on through greater local empowerment, but it does not expect to resolve them immediately, even with the advent and proliferation of modern technologies.