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Wise Coastal Practices for Sustainable Human Development Forum

Cost benefit analysis of major infrastructural developments / Papua New Guinea.

Posted By: Haraka Gaudi.
Date: Thursday, 10 June 1999, at 2:46 p.m.

Key words: foreign investment, international lending agencies, risk assessment.


The government of Papua New Guinea is increasingly being challenged by stakeholders in areas of major infrastructural development such as mining, petroleum, roads, bridges, wharves, etc. Threats by disgruntled land owners (on whose land the projects go through) to block the developments and impending law suits against the government and developers are viewed as major setbacks to proponents of development. These groups argue that the country needs the dollars from the export earnings to boost the national economy. Job opportunities also will be created for many people. Local land owners, their elected politicians, environmentalists, non- government organisations and others cry foul that the local communities have been cheated in the initial stages of negotiations and would not get equitable shares of the proceeds of these developments. Worse still is the realisation that their natural environment will be damaged by the projects.

These fears are raised by the experiences of land owners on existing project sites. Environmental degradation for instance has been brushed aside by the giant BHP Ltd. which operates the OK Tedi Copper Mine in the Western Province. Environment issues became prominent when the local land owners engaged Australian lawyers to fight their case in BHP's home state of Melbourne, Australia. Although, the Supreme Court of Melbourne ruled that it had no jurisdiction to hear the case because PNG was a sovereign state with its own laws, at least the case drew international attention.

The eight year civil war on Bougainville (although under cease fire agreement and holding) started as a result of land owner dissatisfaction of missing out in the proceeds of their land (copper) operated by Bougainville Copper Limited. People simply got fed up that they were missing out at the expense of their environment and decided to revolt.

As a result of these negative experiences prior to and after independence in 1975 from Australia, the above mentioned stakeholders as well as government advisers in the bureaucracy are now pressuring the government to take stock of its own unwise practices. By law, the government is required to engage its own officers, experts and consultants to undertake feasibility studies to assess comprehensive cost benefit analysis of all major projects prior to official approval given to proceed. In the past this task was undertaken by experts and consultants engaged by the developers because successive government didn't have the money to conduct their own independent feasibility studies. One therefore can question the impartiality of such studies and findings.

Cost benefit analysis normally meant economic cost benefit. What is required now is environmental and social cost benefit analysis such as the one I undertook (although after the projects have passed the implementation stage) in the Motu Koita pilot project area. As much as possible, local consultants like myself who are familiar with the project area should be engaged by the government to conduct the environmental and social impact studies. The advantages are that we will be cheaper and the recommendation/resolutions made will affect our own futures too. We will not write reports and disappear without experiencing the consequences of our decisions like our foreign counterparts.


It will take some time for the effects of this wise practice to be felt but at least there will be no rushing to get projects approved hastily as has been the practice.


Additional to the general wise practice characteristics listed during the initial phase of the edg, my approach is that of social policy submission in nature, with the view of influencing government policy to take heed of the more sensitive social and in particular environmental issues discussed in my research paper.


Renewable and nonrenewable resources will in the end be exploited for economic benefits of the country. The issue at hand now is how to best exploit these resources with minimal environmental degradation. A project with a sound environmental plan when implemented will, while achieving its economic objective, also benefit the local community. The land owners should also utilise the same coastal and marine environment to sustain their daily livelihood. They should benefit from their equitable shares and use these to finance social welfare services such as schools, health centres, business opportunities etc without having to rely too much on government handouts.


During the planning stages, government officials from the Environment and Conservation Department, local consultants and academics as well as land owners and politicians will become knowledgeable about issues of equitable distribution of wealth, land owner concerns, environment awareness, sustainable use of resources etc. The process of conscious building or awareness among stake holders in itself is a wise practice.


The wise practice will ensure that the developers don't violate the environmental restrictions and guidelines in place. Government officers from the Department of Environment and Conservation will see to it that Environmental Laws are not violated. Land owners' rights to the use of land and its abundant resources will be protected because they can monitor if the development infringes on their right. Land owners can also turn to government officials to prosecute developers who don't comply with established laws. In this way environmental degradation can be minimised and future generations can benefit from sustainable use of resources on their land.


This wise practice has resulted in the billion kina (K1:US$0.40) PNG to Australia Natural Gas project being put on hold due to the government of PNG's failure to honour its share of funding the Cost benefit Analysis Feasibility Study. In the past, projects were approved based on the results of studies carried out by consultants representing the developers and financiers, obviously putting their interests before the other stakeholders. This is the first time that the authority of the government of PNG has been questioned by its own senior bureaucrats to take stock of its own responsibility and not to pass the buck to the developers. It is believed that this wise practice can be transferred to the Mout Koita area as well as anywhere in PNG, although whether it can be transferred elsewhere remains to be seen.


The wise practice does benefit a majority of stakeholders groups especially traditional land owners in PNG who have the most unique privilege of owning 97% of the total land mass of the country. The government of PNG only owns 3% of the land mostly where towns and cities are located. Some developers and financiers especially the World Bank and IMF will oppose the wise practice under their structural adjustment programme because it will be contrary to their established criteria for lending to PNG as development loans.


Although the intervention came from senior advisors of the government in no uncertain terms, many stakeholder groups including lawyers, politicians, resource owners, land owners, church groups and others have applauded the stance taken. It appears that the government has admitted its own shortcomings and those of the previous governments in power but there are influential individuals who will still give preferences to large developers with considerable job creation potential.


This radical stance was taken only last month or so (April-May) and the effectiveness of the wise practice cannot be measured as yet. If only this was articulated prior to the planning and implementation of the projects in the Motu Koita Area, events would have been different. It is envisioned that the effects of this stance will be long lasting and will affect future projects in PNG.


Land to the people in PNG means everything. It is their heritage. To people of the western world land and its resources are commodities for exploitation. This wise practice will give opportunity to traditional landowners to meaningfully take part in the development of their land and its abundant resources. They will have an equitable share of the proceeds of the resources from their land and heritage.


Years before and 24 years after independence, development in PNG has always been dictated by outside forces: developers, financiers etc. Everything was done according to the terms and conditions of these forces. Papua New Guineans are now becoming increasingly wary of the intentions of these outside players and are beginning to openly question the rules of the economic playing field. Whether this turn around will scare off developers is yet to be seen although the saying in my paper. 'Enough is Enough' has finally been realised on a national scale. The harsh economic realities of the time are forcing people to take stock of their own situations and this seems to be a positive trend.


This development is very new and needs to be monitored and documented well as we progress.


It is too early to evaluate whether this wise practice will hold or die a natural death. The question of whether the government of the day will give it full political backing is yet to be seen. The political climate in PNG is so unstable that only time will tell if this wise practice will be accepted at all.


This wise practice will appear strange to our conventional approach drawn up in Paris but strange at it may be, it is a step in the right direction where governments have to be answerable to their own people. For so long governments like those in PNG have operated on the terms and conditions of powerful and influential financial institutions from outside. It is time for the government to make the right decisions for the benefit of people they govern. Finally, political realities in the end will determine the success or failure of this seemingly wise practice. Over to you all for your burning comments which I believe have been challenged.

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