Countries of the World/COUNTRYS.BIN/dp/0279/02798.txt

Text File | 1991-06-25 | 27KB | 428 lines

$Unique_ID{COW02798}
$Pretitle{294Q}
$Title{Papua New Guinea
Chapter 4.    Economic Planning and Policy}
$Subtitle{}
$Author{Mark Easton}
$Affiliation{HQ, Department of the Army}
$Subject{million
percent
new
government
papua
land
production
guinea
areas
country}
$Date{1984}
$Log{Market Scene in Rabaul*0279801.scf
Tolai Farmers*0279802.scf
}
Country:     Papua New Guinea
Book:        Oceania, An Area Study: Papua New Guinea
Author:      Mark Easton
Affiliation: HQ, Department of the Army
Date:        1984

Chapter 4.    Economic Planning and Policy

     The government's national development strategy sought to improve the
quality of life for Papua New Guinea's predominantly village population and
focused on rural development in the less developed areas of the country. A
second objective was to reduce the heavy reliance on Australian aid by
developing a few large natural resource projects. The first goal recognized
that for generations the people would continue to rely on the agricultural
sector for their livelihood. Revenues from enclave mining were to provide
resources for the financing of development programs. To carry out this dual
strategy the government established an annual National Public Expenditure Plan
(NPEP), a rolling four-year plan for the public sector to link the planning
process with overall economic policy. The first NPEP in 1978 accounted for
only 4 percent of budget expenditures, but by 1984 the NPEP covered more than
25 percent of the planned total budget expenditure.

     Of particular concern has been the lack of growth in the agricultural
sector. Major constraints to developing this important sector have been
inadequate extension services, lack of finance, land laws that prevented the
consolidation of inefficient smallholdings, the shortage of management talent,
and old legislation designed to encourage the transfer of foreign-owned
plantations to Papua New Guineans.

     In order to attract foreign investment and revitalize the agricultural
sector, the government decided in 1980 to suspend the Plantation Distribution
Scheme, which had allowed for the compulsory purchase of foreign-owned
plantations and their redistribution to Papua New Guineans. Other measures
included generous depreciation allowances, permission to introduce piece-rate
wages, and allowance for the transfer of estate land titles between expatriate
owners under specified conditions. A line of credit was set up through the
commercial banks from the Bank of Papua New Guinea to fund foreign-owned
estates. The government was also considering developing joint ventures in
which it would assume the complicated risks related to land titles from
foreign investors. A special ministerial committee was set up in 1980 to
develop a comprehensive agricultural policy.

     Fiscal and Monetary Policy. Government and Central Bank policies have
become increasingly conservative. The devaluation of the kina in 1983, though
partially inflationary, was timed to boost export earnings and reduce imports.
The decision to restrain wage increases was deflationary and was expected to
increase job opportunities. In 1983 the government also decided to cut its
staff by 10 percent, restrain the growth of expenditures to 3 percent, and
trim the cost of capital projects. Nevertheless, expenditures were projected
at K731 million and receipts at only K622 million. Australian aid still
composed nearly one-third of all government income. The commodity
stabilization funds, moreover, were being depleted. In 1982 the funds paid out
K7 million, and K167 million remained. The copra fund was in debt to the
government.

     Budget forecasts for the 1983-87 period called for expenditures of K3.1
billion, which included the repayment of principal and interest on public
loans equivalent to 16.6 percent of total expenditure. Capital expenditures
were to be 23 percent of the total. About K1.7 billion of the expenditures
were to be paid for from tax and other revenues. Some 62 percent of the
forecast resource gap of K1.4 billion was to be met through the Australian
budgetary grant, about 24 percent from overseas and domestic commercial loans,
and the rest from overseas concessional loans.

     The government has mandated several important statutory commercial
enterprises, the major enterprise being the Electricity Commission, Air
Niugini, the Harbors Board, and the Post and Telecommunications Corporation.
Budget expenditures for these four authorities were K209 million in 1981. In
1983 the government expected them to transfer profits of K18 million back to
the government. Both the airline and the electricity commission generated
profits in 1981, but the profitability of all four depended partly on high
tariffs that adversely affected consumer costs.

     The government's monetary policy turned restrictive in the 1980s. The
narrow money supply decreased in 1981 and 1982, while the broad money supply
rose by 8 percent and 5 percent, respectively. Commercial bank lending rose
by 12 percent in 1982, but new lending commitments by the Papua New Guinea
Development Bank fell sharply. Prime interest rates dropped by 2 percent in
1982 to 12.5 percent but were still high in comparison with inflation. In 1983
the government planned to increase the broad money supply by 7 to 10 percent
and bank lending by around 13 percent.

     Land Policy. Clan groups held 97 percent of the land of Papua New Guinea
under complex customary ownership and usage rights that varied among the
country's 700 ethnic groups. Ownership rights were normally acquired through
birth, but acquisition of land by purchase had become an established custom
in a few areas. Land use must be distinguished from landownership; most land
was owned in common by the ethnic group, while usage rights for individuals
within groups varied greatly. A further distinction was often made regarding
the trees or fruits of the land, which were considered the property of an
individual or family and in some instances of the extended group. Under the
practice of shifting cultivation (see Glossary), no requirement existed for
clear title to land plots. Smallholders, who accounted for about 50 percent of
the area under cash cropping, used customary land and still generally did not
own their own land. Disputes over usage and ownership were common and hampered
agricultural productivity in some areas.

     European contact, especially in those areas formerly under German
control and in Papua prior to 1906, resulted in considerable alienation of
customary land and its transfer to freehold title held by Europeans. Following
World War I the Australian administration established the principle that no
new freehold land was to be granted to expatriates. In the period prior to
independence, some traditional groups insisted on the return to them of lands
that had been alienated by foreigners, causing considerable tension and
conflict. The Land Commission was established immediately prior to
independence to review all land issues in Papua New Guinea. It concluded that
freehold titles held by expatriates should be converted statutorily into
government guaranteed leasesholds, generally without compensation to the
freeholders. Freehold land held by Papua New Guineans was to be converted to
group titles. The government was urged to acquire alienated plantations in
land-short areas, by compulsory means if necessary, and then to return them to
adjacent communities. Legislation was enacted subsequent to 1973 to carry out
the recommendations of the Land Commission. Some 70 European plantations (out
of some 1,200 plantations in the country) were acquired by the late 1970s.
Although individual ownership of land by Papua New Guineans was not
encouraged, the government did enact legislation to provide titles to various
groups for the customary land they held and to define customary rights for
land use. The principal objective of government land policy was to
rationalize, strengthen, and revive traditional or customary land usage. The
impact of the