Papua New Guinea's new government aims to maintain investor confidence and growth

The economic downturn resulting from lower global commodity prices and the completion of the PNG LNG project have led to some criticism of the national administration; thus, the future for Papua New Guinea must be navigated with care. Peter O’Neill, who secured a fourth term as prime minister in the mid-2017 elections, faced the threat of a vote of no confidence in mid-2019. He resigned in May 2019 and Parliament elected James Marape, the former minister of finance and representative of the electorate Tari-Pori Open in Hela Province, as the new prime minister.

Some key challenges now face political decision-makers, with the electorate calling for improvements to social and economic infrastructure, a goal of promoting inclusiveness, and efforts to combat both real and perceived corruption. Despite these difficulties, PNG possesses plentiful natural resources, which, given effective management, could provide revenue to spur diversification and inclusive growth.

Independence 

In 1964 a joint mission to the territory by the Australian government and World Bank established a roadmap for economic and political progress. The territory was renamed PNG in 1972 before achieving independence three years later. The first elections were held in 1977, with Michael Somare sworn in as the elected prime minister. However, the following years were characterised by political instability, with a number of short-term governments and snap elections. A decade-long armed secessionist revolt on Bougainville Island in the 1980s and 1990s led to the loss of approximately 20,000 lives. In 1998 the violence ended in a ceasefire, followed by the signing of a peace agreement in August 2001.

The first elections for the government of the Autonomous Region of Bougainville (ARB) were subsequently held in 2005, with the people choosing Joseph Kabui, the former leader of the pro-independence movement, as president. Elections were held again in 2010, with President John Momis taking office. The final portion of the peace agreement has a referendum on independence, which has been tentatively set for November 23, 2019.

Political Disquiet

he 111 members of Parliament are voted to their post by preferential elections from single-member constituencies, with appointment of those candidates who receive at least 50% of preference votes. The ninth and most recent general elections were held in 2017, when O’Neill was re-elected as prime minister. This term came with considerable opposition from within and outside government.

In April 2019 the government signed an agreement for the Papua LNG project with French energy giant Total. Marape, the minister of finance at the time, opposed the signing under set terms and left the government. He claimed PNG needed to receive more benefits from its resource projects. Followed the signing of Papua LNG, the pressure on O’Neill increased. In May 2019 opposition members formed the Laguna Camp, named after the hotel where they were holding their meetings, while supporters of O’Neill formed the Crown Hotel. Weeks of political turmoil followed and several members of the Crown Hotel crossed over to the Laguna Camp. On May 29, 2019 Peter O’Neill confirmed his resignation as prime minister of PNG. Following a swift vote in Parliament, James Marape was elected prime minister on May 30.

Executive Powers 

It is the mandate of the prime minister to appoint the heads of ministries, formally known as the National Executive Council (NEC). Following the mid-2019 Cabinet change, the NEC contains 33 members from a range of parties. Prime Minister Marape left O’Neill’s People’s National Congress (PNC) party and currently leads the Pangu Party, the oldest party in PNG. Davis Steven is the deputy prime minister and is unaffiliated. He is also the country’s attorney general and minister for justice. The PNC remains the largest party in Parliament and began as a partner to Marape’s government, with several members holding key positions. However, in August 2019 Prime Minister Marape announced that his Pangu Party would detach itself from the PNC after accusing O’Neill’s party and several opposition members of undermining his government. Cabinet members and ministers were given an ultimatum to either leave the PNC or the Cabinet.

The resulting Cabinet reshuffle saw several members of the opposition join the government. Key positions in the government are also held by members of the People’s Party, Our Development Party, the Melanesian Alliance Party and the People’s Progress Party.

In addition to leading the NEC, the prime minister has a range of other appointing powers. These include installing the head of the police force – the commissioner – who, in turn, names the leader of the National Fraud and Anti-Corruption Directorate (NFACD). However, political and judicial conflict has recently ensued as the commissioner and the head of the NFACD have disagreed over their attempts to prosecute government officials regarding corruption allegations.

Party Jumping 

The nation’s political landscape has been characterised by party fragmentation, localism and patronage in recent years, causing politicians to engage in party- and coalition-hopping. Efforts have been made to counteract this, however, including the passage of the Organic Law on the Integrity of Political Parties and Candidates in 2001. The regulation sought to restrict members of Parliament (MPs) from switching parties, extend a grace period for the ruling government before a vote of no confidence could be submitted and prevent MPs who initially supported the government from joining the opposition. Meanwhile, laws were introduced to enhance the authority of MPs over their localities. The District Services Improvement Programme, designed to direct state revenue towards local development, has also been expanded, though questions remain regarding the capacity of the local authorities who are tasked with managing these funds. One effect of this decentralisation has been the increased power of MPs, which has led to the creation of large coalitions of governing parties.

Parliamentary Procedures 

The NEC forms policy and submits draft bills to the legislative branch, the National Parliament, which follows the Westminster model. However, there is no upper house in PNG. The assembly has 111 seats, of which 89 are elected from single-member open constituencies, 20 from province-level constituencies, and one each from the ARB and the National Capital District (NCD). All bills must pass through the assembly before becoming law.

The limited preferential voting system has been in use since 2007, under which voters list their top-three candidates. In the previous general election, in 2012, the PNC won a plurality of seats, with 27. That year the Triumph Heritage Empowerment Rural Party secured 12 seats and the PNG Party won eight, with a total of 21 parties and 16 independents represented in Parliament. To date, no single party has won a majority of seats. In addition, MPs may pass a vote of no confidence in the government, causing its leaders to resign; however, this cannot be submitted within 12 months preceding a general election or in the 18 months that follow.

Local Structure 

Since 1995 MPs elected from the provinces and the NCD have also been appointed as provincial governors. PNG has four geographical regions – Highlands, Islands, Momase and Papua – but these serve no political function. Each province within its respective region has its own Provincial Assembly that mirrors the structure of the Parliament. Provinces are divided into districts, which are governed by locallevel governments (LLGs). The ARB comprises three districts, each separated into LLGs, while the NCD is considered one district, subdivided in the same manner.

Provinces have tax-raising abilities on top of receiving central government disbursements, with the local MP or governor possessing considerable power over education, health and local economic development. There has also been a recent increase in the regional distribution power of funds, with district authorities being granted more authority over spending and decision-making.

Vision 

Prime Minister Marape has indicated he will look to make changes to natural resource legislation, having reported to Parliament that these laws are outdated. In addition, there is a perception that insufficient levels of major project revenue flow back to the government and local communities. While industry players wait to see what impact this policy direction has on natural resource projects, Marape has sought to allay fears, saying that any changes to laws would not be retrospective and existing deals would be honoured. Indeed, after months of uncertainty surrounding Papua LNG, in September 2019 the government announced that the project was cleared for implementation; Total, however, had not yet publicly commented. Prime Minister Marape has also said that such changes are unlikely to be implemented for some time. “I am in the business of making huge decisions in as far as the resource laws are concerned, but we will do it very slowly,” he said in an address in June 2019. “I am looking at 2025, in which we will migrate to a new legislative framework.”

Agriculture, making state-owned enterprises more profitable and setting up a sovereign wealth fund will be particular areas of focus in the new government’s policies to reform the economy via diversification, as is lessening dependency on the energy and mining sectors (see analysis). Marape has also stated that fighting corruption is a main goal for his government.

Outlook 

Despite some challenging conditions, PNG is expected to benefit from fiscal reforms, new extractive projects and stronger ties with regional economies after hosting the APEC Leaders’ Summit in 2018. The new government under the leadership of Prime Minister Marape stated that PNG needs to see more benefits from projects in the energy and mining sectors, and some worry that this may lead to the delay of new projects and thus economic expansion. However, short-term growth prospects remain strong: the IMF forecast GDP to expand by 3.8% in 2019 and by 3.1% in 2020, while the World Bank predicted PNG’s economy would grow by 5.6% and 3.1%, respectively. Ultimately, it is in the government’s – and the country’s – interest to expedite plans within the natural resource sectors to minimise the risk of dampening investor confidence.