Papua New Guinea to hold referendum on Bourgainville's regional autonomy

Situated at the eastern-most point of the New Guinea islands and in a different time zone from the rest of Papua New Guinea, the Autonomous Region of Bougainville (ARB) is composed of two large islands, Buka and Bougainville, separated by a narrow tidal channel. Together with over 200 smaller islands and countless atolls, it forms an archipelago which is geographically, geologically and culturally closer to the neighbouring Solomon Islands than to PNG. Bougainville has a population of over 300,000 who speak a dozen different languages. The other major groups of islands in the autonomous province are Nukumanu, Takuu, Nuguria, Nissan, Tulun and Motlock, all located on strips of coral rising no more than one metre above sea level.

Recent History

Named after the French explorer, Louis-Antoine de Bougainville, a contemporary of James Cook, the province was an annexed territory of the UK until 1886, when Germany and the UK marked their spheres of influence in the Western Pacific, cutting the Solomon Islands roughly in half. German New Guinea, which occupied the northern part of the archipelago, existed until the end of the First World War, when Germany lost its colonial possessions.

In the aftermath of the Second World War, Australia colonised New Guinea as a trust territory of the UN, and Bougainville was absorbed politically into the state of PNG in August 1976, roughly one year after the country’s independence, following a failed bid for self-determination. Before the secessionist rebellion that begin in the 1980s, the province was among the most economically productive, with an excellent education system and a well run government. Its Panguna mine contributed to as much as 45% of the PNG’s export earnings between 1972 and 1989; however, this ended with the closure of the mine.

Crisis Years

In 1987 the landowners of the Panguna mine, one of the world’s largest deposits of copper under the Crown Prince Ranges of Central Bougainville, demanded better environmental protection and repayment of profits from the Bougainville Copper, a subsidiary of Rio Tinto, which caused civil unrest. When the PNG government sent the army in to mount a counterinsurgency campaign, against a rebel group led by the Bougainville Revolutionary Army (BRA), it escalated into a fight for independence that lasted 10 years and claimed the lives of approximately 20,000 people, while bringing the island’s infrastructure to a halt. Even when the PNG soldiers were pulled out in 1990 following a ceasefire agreement, a painful conflict continued among the islanders themselves, as the local elite monopolised land, compensation payments and business opportunities. During the 1990-91 period, when a blockade was placed around the island denying humanitarian aid to civilians, more than 3000 people died. A peace agreement was finally signed in 2001 and the following year weapons were surrendered to the UN. With the 10-year conflict now over, life has largely returned to normal in Bougainville. Moreover, the autonomous region has been deemed safe for both business and travel, while the reconstruction effort is continuing to build momentum.

Referendum For Independence

Under the terms of the Bougainville Peace Agreement, the PNG government made amendments to the National Constitution to guarantee a referendum on Bougainville’s future political status, to be held no sooner than 10 years and no later than 15 years after the election of the first autonomous Bougainville government. The target date has now been set for June 15, 2019.

The National Coordination Office for Bougainville Affairs (NCOBA) is the body in charge of cooperating with the PNG national institutions including departments and state-owned enterprises for a whole government approach on the issue. While the outcome of the referendum will be subject to ratification by the national government, based on conditions for weapons disposal and good governance, the two governments will also have to consult over the results of the referendum, together with the parties of the peace agreement, which includes the UN, the Australian, New Zealand and UK governments, as well as the Pacific neighbours of Solomon Islands, Fiji, Vanuatu and Tonga. This means that a long period of negotiations will follow the actual results, conforming to local Melanesian conventions for settling disputes. The Joint Supervisory Body, which oversees the process and is chaired by both the prime minister of PNG and the president of the Autonomous Bougainville Government (ABG), have recently agreed that the referendum should be conducted by an independent body to ensure that the rule of law will be respected.

According to a 2014 UN report, a great deal remains to be done in terms of building awareness, so that the Bougainvilleans are better informed of the economic and institutional implications of a breakaway from PNG, as well as becoming fiscally self-reliant. It is necessary for citizens to understand a number of the possible risks of the different scenarios, even though an outcome in favour of independence will most likely lead to years of negotiations between the two governments, which could result in a federal state, rather than an independent country. Research conducted by the University of Goroka in 2016 on the behalf of the Bougainville government showed that there is still confusion among many Bougainvilleans about the differences between an autonomous state and full independence, as well as the content and format of the referendum.

Local Government

Organic laws on provincial and local-level governments do not apply to the ABG, as it is no longer a national province, even though PNG remains its sovereign state. The ABG’s political structure has therefore developed in response to the preceding years of civil war, and features different interest groups represented by the 41 members of the parliament of the provincial government. This includes the president; 33 members from their respective constituencies; three women representatives from each of the three regions (north, central and south); and three ex-combatants from the same regions, although by the next presidential election, to be held in 2020, the latter interest group will cease to exist. There are four representatives for the ABG in the national assembly, and while the president of the government is elected directly by the people in a separate ballot, he selects the cabinet members. The parliament’s speaker, who is the 41st member of the body, is appointed by the other 40 members. A new district-level community government act was introduced in 2016, which is expected to significantly affect alluvial mining, as districts will ultimately be able to introduce their own specific laws to regulate the industry. Since the political crisis, administration and commerce have centred on Buka, but the autonomous government plans to return most government functions to Arawa, a city on the east coast roughly at the centre of mainland Bougainville, which until 1989 was the province’s administrative and commercial capital. Arawa is now connected through the Aropa Airport, which reopened in 2014 after 24 years of closure due to the Bougainville crisis.

However, implementation is often slow at all levels of government, with financial management practices that are not closely scrutinised affecting service deliveries. Absenteeism in public offices is also a challenge for the administration, as people often prefer to solve issues informally at the village level.

Mining

One of the sectors that have been fully transferred to the ABG is mining, which also presents the most promising growth sector. The terms of the autonomy arrangements that ended the war in 1997 raised questions about the rightful ownership of the mineral deposits to be found under the island’s mountain ranges, and were addressed in 2014 through the new ABG’s mining laws, which amended the 1967 Bougainville Copper Agreement law. The new mining law stated that the Bougainville Copper Limited (BCL), a subsidiary of Rio Tinto, would have its mining rights changed from a special mining lease to a simple exploration licence, essentially placing all ownership of the minerals with the mine’s landowners, a resolution that sparked BCL’s exit from PNG after a nearly two-year review of its position.

The controversial decision, which transferred BCL’s 53.8% share in the PGK177bn ($60.4bn) defunct Panguna gold and copper mine to an independent trustee in Australia – effectively turning the ABG and the PNG government into equal shareholders, with 36.4% each – provides a platform for a new political space where the two governments can work together on future options for the resource. The ABG has already requested that the national government should pass on the 17.4% of the shares it was given by Rio Tinto. It claims there was inequality in the way the benefits from the mine were distributed historically, and is wary of the fact that the national government could acquire additional shares from minority shareholders and gain a controlling interest, which it would find unacceptable to the ABG.

Meanwhile, exploration licenses may be put up to international tenders in the near future as a first step towards restarting the mine, as recently announced by John Momis, president of the Autonomous Region of Bougainville. An international tender bidding process would be the preferred method of application, rather than first-come-first serve arrangements – as is common in the rest of PNG – even though both options are currently under evaluation. While ABG law states that there can only be two major mining operations at the same time in the autonomous region’s territory, there are many opportunities offered by alluvial mining, which continues to be unregulated even though it is a major source of export earnings. Yet due to the uncontrolled use of mercury, the subsector poses a greater threat to the environment than large-scale mining, according to the local department of mining and energy resources, which points out the need for training and capacity building as an essential step to regulating the industry. The ABG distinguishes between two types of small-scale mining, mechanised and non-mechanised, with the latter being virtually unregulated, as there are no taxes on revenues, save for a fee that the local government charges to prospectors once approval has been granted from the ABG authorities.

Land Ownership

All land that is not freehold is collectively owned by individual clans, with individual households enjoying user rights to collectively owned land to earn a living. The ARB is one of the regions in PNG where the matrilineal kinship system is predominant, which means that land is generally inherited through females and that a man has ownership of land through his wife or mother, except for the district of Buin and the Atolls Districts where inheritance is patriarchal. However, men are still considered heads of household and are more likely to dominate membership of village-based organisations.

However, there are female chiefs in villages and they can be relied upon to bring female perspectives to meetings or consultations. Due to the matrilineal kin system, women’s opinions are not disregarded or overlooked as is the case in many traditional societies, because they are a key element to protecting family interests, where the inheritance of land continues to be the most important asset.

Non-Mining Sector

Although Bougainville has little flat land except around the coastal fringes and in the north, the majority of the population live by working customary land, growing food crops and domesticating animals, making agriculture the most important sector to the national economy. Fertile areas are characterised by rich volcanic soil, ideal for coconut and cocoa plantations, which continue to be the most lucrative cash crops on the islands.

According to Tuia International – a New Zealand consultancy that advises the ABG on developing investment laws – the agriculture sector, especially cocoa, copra and virgin coconut oil, can expect to attract the greatest shares of non-mining foreign investment in coming years, along with tourism and fisheries. These key sectors naturally meet Bougainville’s cultural, economic, environmental and social needs, as opposed to more intensive sectors like the extractive industries. Copra prices are currently at a four-year high, trading at around $1000 per metric tonne since April 2016, which is sparking a new wave of activity among coconut farmers from Buka Island and the ARB as a whole. Although farmers are flocking to Buka’s Pristine 101 copra mill, buyers cannot get enough supply to satisfy demand and offer special prices and rebates to farmers who can sell 30 or more copra bags at any given time.

The cocoa industry, meanwhile, which offers much greater returns compared to the labour-intensive copra industry, continues to recover from the cocoa pod borer pest, which has crippled the industry in recent years. According to the Cocoa Board of PNG, it is unlikely to ever be fully eradicated, but might be contained. Whereas in other provinces like East New Britain, were production between 2008 and 2012 dropped 80%, in Bougainville the most mature cocoa survived, as the pest arrived later in the growth cycle and has been better contained. As many as 60% of Bougainville families are involved in cocoa, which is also a factor that assisted in the containment effort.

Cocoa has been trading at around $3000 per tonne for the last two years on the international market, and forecasts point to greater global demand and a shortfall of up to 1m tonnes by 2020, thus the industry may offer great opportunity. According to a study by the Pacific Agribusiness Research and Development Initiative, approximately 18% of the world’s cocoa bean supplies come from the Pacific, including PNG, but only 10% are being sold to the premium market, which presents an even greater opportunity for the high-quality Bougainville beans. Prior to the Bougainville Crisis, the autonomous region exported 30,000 tonnes of cocoa every year, while production today amounts to 13,000 tonnes, although farmers could triple their output by improving management practices. The industry will also receive a further boost of PGK7m ($2.4m) through a Commodity Support Facility package, a joint economic development initiative of the ABG and the governments of PNG, Australia and New Zealand. This agreement offers grants and targeted assistance to farmers as well as traders, and includes financial literacy and business management training. Similar packages may be offered to other industries in the future as well.

Infrastructure

Opening up feeder roads to farming communities, and so enabling them to move their products from farm sites to marketing centres, could lower agricultural input prices and increase production, though upgrading the network continues to be a major challenge in Bougainville. The government has already completed PGK11.6m ($4m) worth of projects with the assistance of the Australian government, which includes the maintenance of around 400 km of Bougainville’s road network every year to reduce costs and travel time. The Australia Transport Sector Support Programme (TSSP), in partnership with the Department for Technical Services (DTS), has agreed on a portfolio of different projects and are currently working on the road from Morgan Junction to Turnuru, rehabilitation of Arawa town roads, ongoing maintenance of the trunk road from Siara Junction, and a large number of community works projects along the road network. TSSP currently plans to spend an estimated PGK25m30m ($8.5-10.2m) during 2015. Historically most of the infrastructure was found in Arawa, the former capital, while Buka town is a sort of an artificial city where people migrated to during the conflict, which turned later into the autonomous region’s capital.

Another major infrastructure project is taking place on Buka island, where a 120-km ring road following the perimeter of the coast from east to west is currently under construction, to be completed by 2020 at the current construction rate of 20 km a year, according to the DTS. These funds are being disbursed by the PNG government as part of their Special Intervention Fund. Over 30 km have been repaired and sealed so far. Both projects were awarded on tenders that went through the Central Supply and Tender Board, and the total cost of the project is expected to exceed PGK240m ($81.9m).

Further projects are also in the works. In January 2016 it was announced that PGK9.7m ($3.3m) has been made available for the Buka town water supply project, also funded through the Special Intervention Fund. In the absence of running rivers, Buka town has relied solely on rainwater for sanitation. This project to will greatly improve access to safe and clean drinking water.

Outlook

A more reliable transport network will facilitate much faster economic and social improvements in the region. Bougainville’s development needs closely echo PNG’s own growth priorities, with infrastructure, improved services, health care and employment all featuring high on the list. Investors will watch with interest to see how the politics of the region develop in the run up to the referendum, against a backdrop of untapped minerals and an agriculture sector that could prove to a highly lucrative drivers of growth.