Wednesday, June 23, 2010

Wealth Creation Under PNG Vision 2050

Below is an article I published in the Sunday Chronicle newspaper.

The Seven Pillars
As readers would know by now, PNG Vision 2050 has seven pillars, which are:

1. Human capital development, gender, youth and people empowerment;
2. Wealth creation;
3. Institutional development and service delivery;
4. Security and international relations;
5. Environment sustainability and climate change;
6. Spiritual, cultural and community development; and
7. Strategic planning, integration and control.

Dr. Musawe Sinebare, a fellow commentator from the National Research Institute and others have discussed at length some of the critical issues related to these pillars in this newspaper. My interest is Pillar Number Two: Wealth Creation.

PNG: Mountain Of Gold, Floating On Sea Of Oil
As all of us know, Papua New Guinea is richly endowed with many natural resources. On the land we have export tree crops such as palm oil, coffee, cocoa, copra, rubber and other exotic fruits and nuts. We also have some of the largest virgin forests with unmeasured timber resources. Several of these large tracts of tropical rainforests will qualify for participation in the trading of carbon credits too.

Under the land we have gold, copper, silver, nickel, diamonds and other precious metals, oil and gas, while in the sea we have many kinds of marine resources of unknown economic potential. We even have gold, oil and gas under the sea! For those who do not know, PNG will be the first country in the world to conduct gold and other minerals prospecting and mining below the sea bed.

Nobody has been able to calculate the total economic value of the country’s resource endowments yet. I guess people have not even attempted to do it, because every time they come up with a figure, it would change, because new findings are being made every day. We are so blessed that we have become the envy of the whole world. Knowledgeable people have actually defined Papua New Guinea as “A mountain of gold floating on a sea of oil and powered by gas.” No other country in the world has been described in such glowing terms.

So Rich, Yet So Poor
For a population of some 6.5 million people, there is enough for everyone to become wealthy. There is enough money around (or in the ground) for all our roads to be sealed, our aid posts, health centres and hospitals to be well-staffed with health workers and well-stocked with medical supplies so that people do not die from preventable diseases, our schools to be staffed with well-paid teachers and equipped with up to date teaching materials so that we produce some of the most academically and professionally competitive people in the world. There is enough for everyone to live in permanent houses with water supply, power, telephone and other services connected right into the remotest parts of the country. And we certainly have enough to provide for a police force that effectively combats lawlessness and maintains a peaceful environment under which ever body has equal opportunity to prosper.

Yet, the irony of it is that we are so rich, yet so poor. Many people in other countries are born poor and become rich but we Papua New Guineans have been born rich but have become poor.

All our development indicators, especially on the social front, are among the worst in the world. Latest indications are that PNG ranks 150 out of 177 countries on the United Nation’s Human Development Index (HDI). That makes us the 31st least developed country in the world on the human development front. Lesser endowed countries like Fiji, Vanuatu and Solomon Islands rank better than us. On the other hand, we are perceived to be among the top 30 most corrupt countries in the world. We score top marks for corruption but very low marks for development and improvement in peoples’ living standards. We can only wish that it were the other way around.

The level of unemployment in terms of holding paid jobs is over 90%. For a country with a working age population of some 3 million, less than 400,000 are on salaried jobs. The education system produces drop-outs at a rate of 85% every year. It is not that our young people lack intelligence; it is that the educational facilities lack the capacity to accommodate them all. There are just not enough teachers and lecturers, classrooms, dormitories, laboratories, teachers’ and lecturers’ houses etc.

The gap between the rich and the poor has been widening at an alarming rate, such as to leave future generations with little to look forward to. According to the World Bank, 25% of the people in PNG were assessed to be living below the international poverty line of US$1 per day in 1996. In 2006, ten years later, the proportion of poor people was 37%. Then in 2007, only one year later, it jumped markedly to 53%! (These figures are taken from Vision 2050 page 17).

The conclusion is this: Our people have been consistently progressing towards poverty. They have become poorer. Interestingly, this has happened during the same time as the country experienced some of the best times since independence in terms of economic growth. While the government and multinational investors have been riding upward and forward on the back of several successive commodity booms, the people have been riding in the opposite direction.

According to most social workers and NGOs that deal with the small people on a daily basis, the increase in lawlessness in the country is to a large extent related to poverty. People steal, kill, push drugs and get involved in prostitution etc because they need money to survive. If nothing serious is done to reverse the increasing slide towards poverty and deprivation, social disharmony and law and order problems are going to escalate even further. We will be a rich country with a lot of poor people who make life very difficult for the few well-to-do.

Another frightening development that has taken place, especially since the 1990s, is the rapid domination of business activities by foreigners, especially those from one particular region of the world. We may pat our backs as proud citizens of a country so richly blessed gold, copper, oil and gas, but the fact is that we have been invaded economically and the actual wealth has been siphoned off under our noses without us realising that this has been happening. In fact, while most of us have not seen these things happening, a few of us have actually been aiding the process and betraying our own people to satisfy our greed and selfishness. The way things are going, it will not be long before all our resources are extracted and the money taken by foreign investors, leaving nothing for future generations.

We have further become a nation driven by the hand-out mentality, heavily dependent on foreign aid. We are so desperate for help that we put our hands out to so-called friends of Papua New Guinea every year, not to give, but to receive. And when they give us, we give them headlines in our newspapers and carry them on our shoulders. We even bestow upon them titles which would make our ancestors squirm in their graves because our generation is trading recognition for handouts whereas people fought and earned such titles in their generations.

To add salt to wound, so-called international consultants and experts come in, pick our brains, process the information, and sell it back to us at exorbitant prices. We think we are being served with innovative ideas to take our country forward, but a critical look will actually reveal that they were our ideas in the first place. In the same way that foreigners import our raw materials and sell them back to us in processed form at very high prices, consultants collect raw information from local people, process and package it, and charge us at rip-off rates. And they sell us these ideas in a certain way as to promote their own interests and keep us in both mental and outward suppression and dependency.

There are so many reasons for this state of affairs, and to address them will definitely take a lot of time and effort. Vision 2050 sets the country in the right direction towards addressing and overcoming many of these national issues.

As far as the subject of our discussion is concerned, one part of the solution is the development of an entrepreneurial class in the country. We need more business people in the country, because such people create wealth using their ideas, time, knowledge, skills and money. They also take the risk to multiply wealth through various investments. When they succeed, they contribute to creating jobs which provide a means of living to other people. Entrepreneurs are therefore assets to society. The more of them we have in the country, the better.

At the present time PNG Vision 2050 states that only 10% of businesses are owned by citizens of this country. The majority (90%) are foreign-owned. That is okay as they are making a contribution to developing the country. But it would be much better if an increasing number of businesses (both small and large) were owned and run by the citizens of this country, because at the end of the day the money remains in the country. Foreign businesses do bring new money and skills into the country; and they do create and provide jobs. But the bulk of the wealth they create and multiply in our country using our resources and people is transmitted back to their home countries where the owners live.

Having assessed what I have discussed so far, I am very excited that the Vision 2050 has wealth creation as its second pillar.

The document makes many good statements of intent. Several statements relevant to wealth creation and economic growth are that the government intends to:

• Empower and positively discriminate in favour of indigenous citizens in business start-ups and expansions;
• Strengthen the capacity of institutions responsible for entrepreneurial training;
• Establish an Entrepreneurship Incubator Scheme; and
• Ensure that 50 per cent of our citizens become self-employed entrepreneurs.

As readers know by now, the last statement is my personal dream. But my dream covers all the people who are not able to get paid jobs, not just 50%. I look forward to the day when everybody who cannot be employed becomes self-employed so that we do not have any unemployed people in the country. As I stated in last week’s article, the answer to unemployment in Papua New Guinea is not employment but self-employment.

Here are some of the significant statements in the Vision 2050 document in relation to wealth creation:

• “Only ten percent of business activities are owned by Papua New Guineans. Entrepreneurial capacity development and skills training are non-existent and income generation is mainly concentrated in the non-renewable resources sector.” (page 36)

• “Opportunities must be created for citizens to start-up businesses and to expand existing businesses. This can be possible through tax relief, technical and financial support, the establishment of an entrepreneurial incubator scheme and other incentives.” (page 37)

• “The State must establish or task an existing entity with the development of the indigenous business sector whose role will be to identify, encourage, fund and grow the sector to enable our people to compete with foreigners in the country.” (page 37)

• “Lack of education and skills development has contributed to a lax attitude and dependency mentality among the population. This has resulted in our people being unable to enter into small business opportunities which are currently dominated by foreigners...The future development focus under Vision 2050 will shift from a poverty reduction mentality to a positive wealth creation mind-set...It is essential that a rigorous program in entrepreneurial skills development is established, and that communities are arranged into cooperative societies or nucleus estates for collective economic growth.” (page 51)

From the responses I have been receiving from readers of this column, it is evident that Papua New Guineans are generally enterprising people. They aspire to start businesses, shake off the shackles of poverty and become the wealthy people they were born to be. Now that the government intends to make it its business to help the people make a shift in their thinking from poverty consciousness to a positive wealth creation mindset, I can say that at least in this instance the desires of the people and their government are alike. The people desire to get into business, and the government desires to help them do it. That is both comforting and exciting.

I truly hope that the PNG Development Strategic Plan 2030 has captured the country’s aspirations under Vision 2050 and translated them into definite strategies and programs aimed at empowering our people to create and multiply wealth. I am also hopeful that adequate resources will be allocated to the Vision, and the strategies and program will be implemented with commitment and dedication on the part of the public servants and other partners, so that at least for once we get our country heading in the right direction of becoming one that is Smart, Wise, Fair, Healthy and Happy by the year 2050.

To people who pray for our country, here is one prayer point: Pray that the God who has uniquely blessed us with abundant natural resources also give us leaders with vision and integrity of heart and managers that are prudent so that we can stand tall among the nations of the world as a rich and powerful country.