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Social Indicators of the Socioeconomic Effects of Corruption

Corruption in Papua New Guinea (PNG) is widespread and endemic, penetrating all levels of society. Although corruption is done in secret, the social and economic effects of it are visible and affect everyone in the country. This article presents the socioeconomic effects of corruption that are made visible through various social indicators of the country.

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Parliamentary Questions by Rt. Hon Sam Basil on Past Political Impasse Case

This article is about the Questions without notice by the Deputy Opposition Leader – Sam Basil about the political impasse in 2011/2012 and the assumed pending court cases related to the impasse.

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Special Purpose Agriculture & Business Leases in Papua New Guinea

Customary Land is being leased by the Lands Department by landowners. The department then leases it to businesses. In many cases it is alleged that the purpose for which the land is being used is not what was agreed to in the lease agreements with the landowners. In some cases it is alleged that landowners were not adequately consulted.

It is also alleged that large scale logging operations in the past (possibly ongoing) have been disguised as development projects using up nearly 5.2 million hectares of customary land.

A Commission of Inquiry (COI) was launched in June 2011 by the National Executive Council with commissioners John Numapo, Nicholas Mirau and Alois Jerewai in charge of the investigation and reporting its findings. The commissioners were given three months to produce a COI report. An extension was requested and granted to push the (parliamentary or public???) hearing dates to January 2012.

During the COI, no authorized suspensions of activity on the grants of new SABLs were made by Department of Lands and Physical Planning, regardless of the cabinet decision leading up to the COI.

Over one and a half years later, COI has produced only an interim report only and which is limited to providing a summary of the existing legal and administrative processes for issuing an SABL.

The unfinished report was tabled in parliament in late September 2013 with the PM expresses his disappointment that so many of the leases had not performed as they should.

Issue

Commission of Inquiry report incomplete and despite a moratorium being placed SABLs were still given out and operations of previous SABLs were not stopped during the inquiry and are still continuing.

Actions currently (October 2013) being taken by Government on this issue: None that we are aware of.

Action TIPNG wants to see

  1. The moratorium being implemented
  2. The COI report being finished
  3. The finished report tabled in parliament
  4. The report being made freely available
  5. Parliament taking actions on recommendations
  6. Those who have broken the law being prosecuted.

Useful Links:   Google:  The New Land Grab in Papua New Guinea

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Motor Vehicle Insurance Limited (MVIL) Scandal

While Dr. John Mua was the CEO of MVIL, 100 million kina from the MVIL account was allegedly transferred without following proper procedures being applied. The funds were invested with a company in Lismore, NSW, Australia called Woodlawn Capital and then supposedly invested.

On the CEO being replaced, the MVIL board implemented an investigation through GadensLawyers and PWC and managed to bring back 9 million kina to PNG and froze the accounts of Woodlawn Capital Ltd, where another 50 million kina was identified.

It seems as if Woodlawn Capital Ltd, does not have the requisite licences to act as a fund manager and so has acted in breach of Australian financial laws.

It is as yet unclear where the remaining 41 million kina is. There have been claims that a portion was lost due to losses on investments as a consequence of the Global Financial Crisis.

In addition to this allegedly illegal 100 million kina transfer, there were also other apparently unexplained transactions on the MVIL account which in total appear to be worth about 50 million kina.

Some in the Social media have suggested that there is evidence that a very prominent former member of the PNG parliament  have been involved in this- especially in regards to the role that member had in relation to the IPBC not giving approval.

It is also suggested that AUSTRAC the Australian body that is supposed to prevent money laundering could have taken a more active role in preventing incidents like this

Issue

Theft or at the very least gross mismanagement of public funds and improper process

Actions currently (September 2013) being taken by Government on this issue: On-going investigations by PWC and Gadens.

Action TIPNG wants to see

  1. The report to the MVIL board being prepared by Gadens and PWC being made freely available.
  2. That the government advise the public on the state of investigations into all other suspicious transactions on the MVIL account.
  3. Those who have broken PNG law being prosecuted – especially the former CEO and any MVIL senior staff who took no action to stop this -in a public trial.
  4. That any former or current members of parliament be prosecuted if they broke the law in any action they took in relation to the MVIL, or omitting to take an action that could have prevented this loss of public funds.
  5. Any board directors who took no action being sacked and being blacklisted so they cannot be on any other public boards
  6. The Australian Government prosecute the directors of Woodlawn Capital.
  7. That AUSTRAC pay more attention to large transfers like this.

Useful Links:  http://pngexposed.wordpress.com/2012/04/16/mvil-struggles-to-recover-money-lost-in-woodlawn-scam/

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The Moti Affair

Mr. Julian Moti, an Australian citizen, had been wanted in Australia for serious alleged overseas child sex offences. He was at the centre of an international dispute following efforts by the Australian Government to extradite him from both Papua New Guinea and Solomon Islands to face charges[2] in relation to an incident alleged to have taken place in Vanuatu in 1997.[3]

After his arrest in Papua New Guinea in September 2006, Moti was released on bail pending an extradition hearing, but went into hiding in the Solomon Islands High Commission in Port Moresby. (He later claimed that his life had been threatened, and so sought sanctuary.)[7]

The Papua New Guinea and Solomon Islands Governments denied knowledge of his whereabouts, but on 10 October he was secretly flown aboard a Papua New Guinea Defence Force aircraft to Solomon Islands where he was arrested by officers of RAMSI on his arrival in Munda, Western Province.  When he left PNG, Moti was in breach of the bail conditions imposed by Madam Justice Catherine Davani of the PNG National Court, and had failed to appear at a PNG court hearing on 30 September.[8] The PNG Government declined to say who in the PNG Defence Force or Government had given the order to fly Moti out. In response, the Australian Government immediately cancelled planned visits by the PNG Prime Minister, Grand Chief the Right Honourable Sir Michael Somare, and Defence Minister Martin Aini, and postponed the annual Australia-PNG Ministerial Forum, and called for an investigation into the flight and prosecution of whoever was responsible.

A PNG Defence Force Board of Inquiry into the escape recommended that Sir Michael Somare and a number of his advisers be charged with offences in relation to the escape, including breaching PNG’s constitution. Sir Michael Somare sought to suppress the Inquiry’s report, challenging the Inquiry’s standing in PNG’s National Court. As yet the Court has not ruled on the validity of Sir MichaelSomare’s challenge to the public release of the Commission of Inquiry’s findings.[9]with the presiding judge likening Sir MichaelSomare’s attempts to suppress the findings of the report as a scandal on par with Watergate.[10]

Prime Minister Sir Michael Somare of Papua New Guinea reportedly “threatened local media with contempt of court over their calls for the official release of the PNG Defence Force Inquiry report that recommends he faces charges”[22] and Somare reportedly does not now support Mr Moti.[23] It does not yet reliably appear that any untoward payment has been made to Sir MichaelSomare for his alleged part in Moti’s passage through Papua New Guinea.

[It should be noted that Julian Moti was later extradited and after a trial it was concluded that he was not guilty. ]

This is an adaptation of the relevant excerpts from:
http://en.wikipedia.org/wiki/Julian_Moti

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Pacific Games Village Contract

This is adaptation of excerpts from
http://malumnalu.blogspot.com/2013/08/chinese-company-awarded-inflated.html

Overview

A Chinese company, China Railway Construction Engineering (CRCE) PNG, was awarded a contract worth more than K263 million to build the 2015 Pacific Games Village at University of PNG, despite the job being valued at only K190m.

Documents provided to The National show that CRCE was not in the top three of the 10 companies that bid for the contract, however, was approved ahead of the rest at an additional cost of more than K73 million to Papua New Guinea.

Sports and Pacific Games Minister Justin Tkatchenko, when contacted for comment, said there was “nothing sinister” about the awarding of the contract to CRCE.

A government source said a professional New Zealand engineering consultancy firm, Warren and Mahoney, did the scoping and estimation for the project which it said was worth K190m.

Moreover, the tender evaluation committee (TEC) of the Central Supply and Tenders Board (CSTB), disqualified CRCE from further evaluation, however, it was somehow awarded the contract.

The 10 companies that bid and their respective prices were:

  • China Railway Construction Group PNG (K149, 549, 896.90),
  • China Railway Construction Engineering PNG (K263, 973, 822.56),
  • Associated Builders (K389, 699, 629.50),
  • J4J Construction & Hardware Supplies (K179, 550, 813.20),
  • China Harbour Engineering Ltd (K153, 307, 006.19),
  • PNG Construction Ltd (K223, 437, 500),
  • Digara Construction Ltd (K226, 479, 798.16),
  • Fletcher Morobe Construction (K191, 453, 653.80),
  • JIC Niugini Engineering (K173, 236, 504.02), and
  • China Railway Group (K189,033, 309.98)

Fletcher Morobe Construction was recommended by the tender evaluation committee (TEC) of the Central Supply and Tenders Board (CSTB) to be awarded the contract at a cost of K191, 453, 553.80.

The other two top companies after that were China Harbour Engineering Ltd (K153, 307. 006.19), and JIC Niugini Engineering Ltd (K173, 236, 504.02)

“Members of the TEC assessed individual bids according to the evaluation criteria for technical scores out of 100, and average totals established to determine the ranking of the bids,” according to the TEC report.

“Emphasis was placed on technical scores for ranking individual firms, while financial capacity was assessed based on the available working capital.

“China Railway Construction Engineering failed to meet the annual turnover requirements and his (sic) failure to provide the working capital, liquid assets and/or credit facilities information, and no certificate of compliance to confirm payment of tax to the IRC, disqualifies him for further evaluation.

Fletcher Morobe topped with 84 out of 100 followed by CRCE (77.3), China Harbour Engineering (77.2), JIC Niugini (76.7), China Railway Construction Group (76.5), China Railway Group (74), PNG Construction (63.5), J4J Construction & Hardware (70.5), Digara Construction (61.3), and Associate Builders (61.2).

While currently there is no evidence of deliberate misdoing, we wonder:

  • What process and criteria was applied to the selection
  • Why other companies which did meet the qualification criteria and with lower prices were not accepted
  • Under what circumstances does the government consider it necessary to ignore the recommendations of the CSTB

This case is still evolving. Clear risks are  that:

  1. company is a unable to deliver on time
  2. the CSTB and its processes are bypassed
  3. later it transpires that inducements were involved
  4. later  a “shelf” company with little or no capacity wins a contract for say 270 million and then sub contracts back to one of the real companies which put in a  bid for 200 million. The shelf company then collects the 70 million for basically doing no work.
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Cairn’s Conservatory Scandal

In 1995 the Public OfficersSuperannuation Fund paid a company owned by the Australian property developer, Warren Anderson, 18.72 million dollars for the Cairns Conservatory which Mr Anderson’s company had bought only a month before for about half that amount.

The PNG Auditor General’s report, tabled in the Parliament in Port Moresby in 1997, criticised the POSF for relying on a valuation provided by Mr Anderson’s company and it contained an assessment from the Valuer General’s office in Brisbane stating that the Conservatory’s market value at the time was about eight million dollars.

Issue

The evidence was all there for a trial for at very least gross incompetence and possibly fraud but it never went ahead.

Actions currently (September 2013) being taken by Government on this issue: None

Action TIPNG wants to see

  1. The case brought to trial and if there is evidence of fraud the offenders punished.
  2. If as the government claimed at the time that there is no case to answer then this should be found out in public trial and not by a member of parliament.
  3. That all the evidence be made public.

Useful Links: http://www.abc.net.au/4corners/stories/s590512.htm

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A banker’s tale of big money, political manipulation and failure

ANDREW FOWLER, REPORTER: Mourners run ahead of a funeral cortege in the capital of Papua New Guinea.
Police had shot dead students protesting against the privatisation of the country’s bank — part of a World Bank reform package.
Dan Weise has the story behind that story.He was the World Bank’s man in Port Moresby.He says politicians used students to keep public assets available for personal corruption.

DAN WEISE, FORMER WORLD BANK PNG: We wanted to see action taken on high-profile corruption cases.

DR TIM CURTIN: He didn’t make himself very popular.

SIR MEKERE MORAUTA, PNG PM: Shall we forget him because he’s — I don’t want to talk about him.

ANDREW FOWLER: As PNG votes for a new government, Dan Weise is blowing the whistle — disillusioned by corruption, by faltering reform, by the inability of the World Bank to make a difference — and by Australian complicity.

DAN WEISE: Officials had clear briefs that politically in Australia there was no interest in hearing bad news on PNG.

ANDREW FOWLER: Tonight on Four Corners, ‘The Insider’ — a banker’s tale of big money, political manipulation and failure.
During the reign of prime minister Bill Skate in the late 1990s, Papua New Guinea edged close to an economic precipice.
Much of the nation’s previous 25 years of independence, had been a tale of poverty and corruption.World financial institutions were reluctant to lend without reforms, which Bill Skate wouldn’t accept.The PM travelled the globe in a desperate hunt for loans.
Professor Ross Garnaut, an Australian expert on economic restructuring, has been a financial advisor to PNG.

PROFESSOR ROSS GARNAUT: Foreign exchange reserves were pretty well exhausted, and that had lead the former prime minister into a rather desperate, ah, throw of the dice responding to approaches from Taiwan, ah, for large sums of money to be made available to keep the foreign exchanges afloat.

ANDREW FOWLER: Dan Weise has lived through the slow-motion collapse of Australia’s old colony.For over a decade, he developed a passion for PNG and a sense of concern.Once a Queensland Treasury official and later a global economic consultant, Weise was posted to PNG’s Reserve Bank in the 1980s on secondment from the Australian Government.He went back to PNG in 1997 as the representative of one of the world’s largest lending institutions, the World Bank.

DAN WEISE: It was the time that the World Bank was involved in a lot of controversy.The team leader up there had been thrown out of the country.He was fighting against corruption and fighting for reforms and it looked like, you know, a time where and a place that was ripe for, you know, some good technical advice so it — it interested me greatly.

PARLIAMENTARY SPEAKER: I declare Mr Bill Skate as the Prime Minister Elect of the independent state of Papua New Guinea.

ANDREW FOWLER: PNG’s relationship with the World Bank had reached an all-time low.In 1999, Bill Skate had also been caught by a hidden camera distributing corrupt payments.

HIDDEN CAMERA FOOTAGE — MUJO SEFA: Can we give him 10?

BILL SKATE, EX-PRIME MINISTER (ON TAPE): No, just give him two and then you spread it over two months.

BILL SKATE: I have been betrayed by my own very friends.

ANDREW FOWLER: Soon afterwards, a threatened parliamentary vote of no confidence ousted him from office.

BILL SKATE: And I intend to give the Governor-General my letter of resignation at 10 o’clock tomorrow.

ANDREW FOWLER: As competing parties vied to put forward an alternative, one surprise candidate, Sir MekereMorauta, met with advisors at his Port Moresby home.Weise says he made an unusual call to Morauta.

DAN WEISE: I took the liberty of calling him, and was put through — through Roslyn, his wife, and was put through and, ah — to advise him, ah — and the factions that were held up in there, that, ah, the bank would be — would be keen on supporting, you know, a government led by him given what he’d said he would do.Now, I didn’t operate with the authority of the bank to do that.
Ah, but it was — it was what the bank had implicitly discussed and in some ways it was probably an inappropriate thing to do but we’d come through a period of non-engagement where the economy was in crisis.We had a person that we thought could lead Papua New Guinea with the right economic policies.And it was on the margin of being elected or not elected and, ah — we thought that that was time probably at least to shed some light on the World Bank views about the sort of support we could do PNG with a government that wanted to do something.

ANDREW FOWLER: Like Weise, Morauta was an economic expert — 10 years managing director of the PNG Banking Corporation and two years governor of the Reserve Bank.As an economist, banker and businessman, he had a reputation for probity.

SIR MEKERE MORAUTA, PM: Corruption, for example — is a growing industry, at least in my own country.

DR TIM CURTIN, FORMER PNG TREASURY ADVISOR: Here was a fresh start, somebody who was, so to speak, Mr Clean, and moreover a technician.

ANDREW FOWLER: Three months into Sir Mekere’s government, Australia, shunned by and deeply concerned about the Skate Government, was back in favour.Walking tall, Prime Minister John Howard visited to signal the relationship was back on track.

JOHN HOWARD, AUSTRALIAN PM: I have been immensely impressed and warmed by the commitment to economic reform of the new prime minister of Papua New Guinea.

ANDREW FOWLER: As he signed off on a new aid package, Howard backed his support for Sir Mekere with hard cash.

JOHN HOWARD: This will provide a significant injection of confidence.It’s meant to demonstrate to the rest of the world that Australia supports the reform program of the new government in Papua New Guinea.

ANDREW FOWLER: Dan Weise, representing the World Bank, wanted to see PNG’s rehabilitation go further.

DAN WEISE: We believed that PNG was going backwards because it had a corruption problem but, in a boarder sense, that was, you know, a crisis of governance.And we had to direct, we really had to attack that head on.And it’s these systemic waves of corruption that really have to be addressed.

ANDREW FOWLER: Weise believed three areas were most in need of reform.He wanted to target corruption which allowed illegal exploitation of resources — especially forests.He wanted the banking sector reformed.A culture of secret payments was in danger of wrecking the economy.Thirdly, Weise wanted individual cases of high-level corruption to be prosecuted as a warning to others.PNG was desperate for financial backing.In May 2000, a high-level delegation headed for Washington to meet the World Bank.The first hurdle was to persuade the World Bank board to consider any loan at all.

DAN WEISE: Even if I believed in the Government, I wouldn’t have been able to get a loan through. I wouldn’t be able to recommend a loan through the system, uh — without a track record being established, because PNG, you know, the World Bank had been burnt before on PNG, in the recent past, so it was important to establish a track record.If we thought governance and corruption were the key — was the key problem, then we had to establish a track record on governance and corruption.

ANDREW FOWLER: The $200-million loan PNG wanted was for budget support, allowing the Government a free hand to spend it.
Hinging on it was another $300 million in loans from other donors.However, the World Bank was demanding a long list of reforms.
The first area to be tested — corruption.The most high-profile case involved legal action against former prime minister Sir Julius Chan.A claim for damages was being prepared, but it had stalled.

DAN WEISE: There wasn’t funding available to pay for the legal counsel.The lawyers said they could not take the case any further because there was no monies in their accounts to interview witnesses and take witness statements and file the writs and things like this.

ANDREW FOWLER: The World Bank decided to play tough.The PNG delegation in Washington was given a blunt ultimatum — phone Port Moresby to arrange funding for the case or the loan is off.

DAN WEISE: We were very blunt with both the chief secretary and the treasury secretary on this issue — very blunt.Particularly with the treasury secretary.

ANDREW FOWLER: Did you tell them that they needed to make the phone call to get the money freed up?

DAN WEISE: Yes, yes.

ANDREW FOWLER: After heated conversation, the call was finally made.The first payment of the loan came through.
World Bank officials were buoyed by this confidential letter to the President of the World Bank, obtained by Four Corners.
In it, Sir MekereMorauta promised to target “high level corruption cases”.He specifically cited the “the Cairns property case” against Sir Julius Chan.

REX PAKI, FORMER MEMBER, PNG RESERVE BANK BOARD: The Cairns Conservatory is one case where it’s a clear case where all the evidence is there, all the legal/financial investigative work has been done.

ANDREW FOWLER: In 1994, then prime minister Sir Julius Chan had appointed a new consul to Cairns.

The consul, a political mate, was told to find a building in Cairns where he could house the consulate and other PNG government offices.The consul arrived to carry out Chan’s instructions and met with West Australian property developer Warren Anderson.
Here at the Pacific International Hotel, Anderson and his business colleagues offered help to find a building.They settled on the Cairns Conservatory, which Anderson’s company offered to sell them.According to a highly critical Ombudsman’s report, the building was bought for $18 million with PNG public money.The Ombudsman noted that independent assessors valued it at just $7 million.The report, tabled in the PNG Parliament, found that “associates of Sir Julius, including his own political party, stood to make a considerable financial gain” from this and an associated deal.The report also found that “Sir Julius acted improperly”.
The Ombudsman recommended the institution of civil proceedings “with a view to recovering money lost as a result of the purchase of the Conservatory”.There was wide support for legal action.

Doctor John Nonggorr is a highly respected constitutional lawyer who has a detailed knowledge of the case.

DR JOHN NONGGORR, FORMER PNG GOVERNMENT LAWYER: Firstly, it would have been a sort of a test case to demonstrate to not only the legal system but also the people in Papua New Guinea that, ah, public officials who abuse trust, abuse their offices, are liable to, um, that sort of action.And, secondly, to send a message to public officials, leaders, political as well as civil service leaders, that, um, they are not beyond the law.

ANDREW FOWLER: The legal action over the Cairns Conservatory case had begun in 1997.Then-prime minister Bill Skate convened a meeting in Cairns to discuss a strategy to prosecute the case.Australian legal firm Holding Redlich was advising, along with the PNG Attorney-General and Dr John Nonggorr.

DR JOHN NONGGORR: We had a meeting in which the, ah, prime minister Bill Skate and his ministers were briefed on what the investigations were and what our tentative views were on whether the material that had been uncovered could form a basis of legal action.

ANDREW FOWLER: For three hours they discussed the strategy.Four Corners has been told the Australian lawyers produced a detailed brief, recommending court action to recover the funds.When Morauta replaced Skate as PM in 1999, the case developed added impetus.

SIR MEKERE MORAUTA: We are responsible, and I am determined, to make sure that our own house is in order before we get out to seek assistance from friends.

ANDREW FOWLER: In October 2000, Morauta’s government lodged a court claim in Cairns and Port Moresby for $30 million damages against Chan, Anderson and the former finance minister Chris Haiveta, among others.

DR JOHN NONGGORR: I understand that the government of prime minister MekereMorauta approved for the writ to be filed in court, and I received instructions from the lawyers in Melbourne to file the writ in Port Moresby, which I did.

ANDREW FOWLER: A few weeks later, the National Executive Council — PNG’s Cabinet — reviewed the case after seeking a second legal opinion.

DR JOHN NONGGORR: The National Executive Council had decided that, ah, this matter should not be pursued.That’s the conclusion I’ve reached.

ANDREW FOWLER: Why do you think they decided that?

DR JOHN NONGGORR: Um, I don’t know because, um, I cannot say what went on through the minds of the people in the National Executive Council.But, of course, ah, people can draw their own conclusions from what has happened.Um, a number of people who were named in the writ are members of the National Executive Council.

ANDREW FOWLER: In the shifting sands of PNG politics, Sir Mekere’s prime ministership was dependent on powerbrokers within his party, the People’s Democratic Movement.There’s speculation that PDM members and financial backers were re-establishing connections with Sir Julius Chan.Morauta denies any political motive in dropping the case.

SIR MEKERE MORAUTA: We came to an end because it was my view, based on advice by lawyers, that this was getting hideously expensive and that we weren’t getting anywhere.

ANDREW FOWLER: And no political pressure?

SIR MEKERE MORAUTA: If you know of any, you let me know.

ANDREW FOWLER: Well, Sir Julius Chan’s very powerful.So, too, is Chris Haiveta.

SIR MEKERE MORAUTA: Well, I’m very powerful too — and I’m Prime Minister.

DR JOHN NONGGORR: We haven’t been given instructions to serve the writ and we don’t see any legal reasons why we should not.
And so, um, the reasons why the writ has been upheld has to be political and not legal.

DAN WEISE: I mean, this is difficult.I mean, vested interests fight very hard and so I have a realistic view about how hard it was going to be and why it was so important for everybody who could make an influence to be together on this issue.

ANDREW FOWLER: And you felt that those people that had had a vested interest had won this one this time?

DAN WEISE: Oh, yes.

ANDREW FOWLER: With Weise unhappy at the failure of the Cairns Conservatory case, out here in the remote Western Province, another of the World Bank’s major conditions for the loan was under challenge.For thousands of years, local people have lived off some of the most ancient forests on earth, hunting animals and harvesting sago.

DAN WEISE: The Bank has taken the opinion that it supports logging but within an appropriate framework, which allows the sustainability of those operations and, er, in the needs of landowners and local residents catered for.

ANDREW FOWLER: The World Bank had tied payment of the loan to a crackdown on corrupt logging practices and a thorough investigation of all the logging licences that had been issued.

DAMIEN ASE, LAWYER FOR LANDOWNERS: You can see there’s no — there’s no drainage.

ANDREW FOWLER: It looks very wide as well.Damien Ase, a lawyer for the landowners, has graphic evidence of illegal logging in the forests of Western Province.What are we seeing here?

DAMIEN ASE: That’s the logs being carried to the barge.

ANDREW FOWLER: Footage shot by a filmmaker for Greenpeace reveals a huge scar through the forests — a 250-kilometre road built by Malaysian loggers from the village of Aiambak to the river port of Kiunga.In reality it’s an unsealed and temporary road to nowhere in a region of the world where few people have cars.The forestry company didn’t get logging permission here.
Instead, they got a road-building permit.The road they cut is in effect a long and twisting logging concession.$100 million worth of trees have been felled and exported to make it.Now the company has applied to extend it through the forests by another 900 kilometres.Support for their cause from the World Bank came as a surprise to the landowners.

LANDOWNER: For the first time, you know, we were thinking that the World Bank sort of can open up discussions with the NGOs so they started to listen to what we were saying.

DAN WEISE: The World Bank had a prime interest in forestry, in the reform of the forestry sector in Papua New Guinea, to ensure its sustainability, to ensure that adequate revenues went — were collected and went to the Government and ensure there was adequate, you know, adequate economic activities for landowners and people to do in those areas.

ANDREW FOWLER: Yet Four Corners has learned that on the day the World Bank loan was recommended for approval, the PNG Cabinet modified its policy on forests.While the World Bank Loan Agreement stated there would be “an independent Review of Forestry Management Agreements”, the Cabinet decided this would only apply to new agreements.The first part of the bank loan was paid, and saw the Kiunga-Aiambak Road project continue without review.

DAN WEISE: A lot of assurances have been given to the communities that the bank would be tough on the conditionality of forestry to ensure that governance improved in the sector.This has not been done and now there’s a lot of misgivings about, er, the bank’s role in this area.A lot of the things focused on watering down concrete implementations to — back to commitments or reviews or cabinet decisions rather than the implementation of something and this is where main things, to me, should not have been negotiable.And this is what we saw happening.

ANDREW FOWLER: The World Bank regional office in Sydney accepted PNG’s dilution of the forestry review.But Dan Weise didn’t.
He was determined to hold the line on the balance of the loan.The privatisation of the state-owned PNG Banking Corporation would be his next test.The World Bank wanted several state-owned enterprises sold off to make them more productive and remove them from corrupt political abuse.

PROFESSOR ROSS GARNAUT: My view is that the state-owned enterprises had become an appalling avenue for corruption.
It had almost become an institutionalised avenue for corruption.I think, er, privatisation as a means of stopping corruption was very important to saving democratic institutions in Papua New Guinea.

ANDREW FOWLER: Weise found himself at odds with the Government over how the sale of the PNG Banking Corporation should be handled.

DAN WEISE: In the middle of the process when a number of banks were considering the submission of their bids, the Central Bank in Papua New Guinea, er, wrote to Westpac and directed them not to bid.It gave no reason.I’ve sighted that correspondence.
Ah, this to me was highly inappropriate given that the two main banks in Papua New Guinea that were bidding were the ANZ at the time and Westpac.

ANDREW FOWLER: Weise thought the exclusion of a big international bank was alarming.

DAN WEISE: It looked like it was non-transparent and I guess it allowed the Government to influence outcomes all the way through the process.

ANDREW FOWLER: PNG wanted a quick release of the next loan payment and Weise made powerful enemies as he fought to have PNG meet its obligations.

DAN WEISE: We’d had discussions about the importance of achieving core conditions on numerous meetings.
And I think they made an assessment that some of those conditions would be difficult to meet and that it might be an easier road to pursue by attacking the messenger.

ANDREW FOWLER: So when Dan Weise is trying to tie specific outcomes in a governance area, how difficult is it to do that?

DR TIM CURTIN: That was immensely difficult, but he did make some progress.But he didn’t make himself very popular.

ANDREW FOWLER: Eight months into the loan agreement, the PNG Government issued a diplomatic note announcing that Weise’s visa had been withdrawn.

DAN WEISE: It was a surprise to everybody.In fact, I was out of the country and they had assumed that I was in the country and they’d given me 24 hours to leave.I was out of the country and therefore, you know, I was refused entry to even come back to get my personal belongings.

ANDREW FOWLER: What happened in February 2001?You issued a diplomatic note announcing that Dan Weise’s visa had been withdrawn.

SIR MEKERE MORAUTA: Yeah.I’m glad we did.Well, I — Look, this is an independent country.It doesn’t belong to Dan Weise.
Why should I answer to anybody — for that action?Not to ABC, anyway.I mean — Shall we forget him because he’s — I don’t want to talk about him.

ANDREW FOWLER: There was a public row.World Bank regional director Klaus Rohland flew to Port Moresby and strongly told Morauta he backed Weise.Morauta reluctantly agreed.Weise would be based in Sydney, but still visit PNG to represent the bank.

SIR MEKERE MORAUTA: He had to be replaced.There was nobody.But we — Klaus knew that the condition was that he came and he kept his mouth shut.And he did.Imagine him sitting in conferences and not saying a word, which is exactly what he did.

DAN WEISE: There was no doubt that the government was uncomfortable with the compromise.And, er — you know, a series of correspondence, er — ..backwards and forwards, highlighted their displeasure in even giving way on any ground.

ANDREW FOWLER: Behind the scenes, Australia too was pushing the World Bank to ease its scrutiny of the privatisation process.
According to internal emails by a World Bank senior economist, the bank felt “the Australians are breathing down our necks”.
And the PNG Government “has put pressure on the bank to lower the bar.This pressure has come from various quarters, including the Australians.”According to Weise, the Australian High Commissioner, Nick Warner, and other consular officials were themselves under pressure.

DAN WEISE: We were told on a number of occasions that officials had clear briefs — that news from PNG was only to be good news, and that politically in Australia there was no interest in hearing bad news on PNG.

ANDREW FOWLER: Did you raise this issue explicitly with Nick Warner?

DAN WEISE: Oh, yes.On a number of times.

ANDREW FOWLER: What did Nick Warner say to you?

DAN WEISE: Well, that these people in their diplomatic language basically said this is, er — ..you know, this is the view from Canberra.

ANDREW FOWLER: And what was that?

DAN WEISE: That — that the Mekere Government should be supported.

ANDREW FOWLER: Four Corners has been told the High Commission was very active in this support and that last year it intervened to stop the PNG visit of a senior intelligence analyst working for the Australian Government’s Office of National Assessments.
He had previously written reports critical of the Morauta Government.Weise charges, and this has been corroborated by other sources, that the High Commission also sanitised field reports before they were sent to Canberra.

DAN WEISE: There is a clear view, both in Canberra and from the agencies collecting information and in the agencies that send information, that Canberra’s only interested in positive comments on the government of PNG.

ANDREW FOWLER: Whereabouts were those changes made inside the High Commission?

DAN WEISE: Well, I don’t know.But it — you know, they were made near the top.

ANDREW FOWLER: Weise maintains PNG’s acute problems were being played down.Research on poverty showed living standards had fallen over the past 10 years.Weise also believes Morauta didn’t properly sell his economic reforms.In March last year, armed soldiers protested against budget cuts.Morauta went into hiding.And Weise says Morauta failed to promote privatisation as an anti-corruption measure.He lost support of students, who rebelled against selling public assets.

DAN WEISE: Corruption actually destroyed the management and allowed the transfer of significant resources.
So we both had poor management and resource transfers.

ANDREW FOWLER: But the students never heard that argument?

DAN WEISE: No.The students just saw the World Bank imposing privatisation.We didn’t impose privatisation and we wanted very much to have an inclusive process where the community could be involved.

ANDREW FOWLER: As the protests increased, schools closed and public transport in Port Moresby came to a halt.For four days in June last year, students and their supporters assembled for the PM to meet them.Some took advantage of the confusion.
Shops and a fast food outlet were firebombed.Homes were broken into and looted.Then, in the early hours of June 26, police shot dead at least four people, three of them students.A few days later, the recriminations started.

SPEAKER AT CEREMONY: Our fallen comrades have been in their fight to educate all Papua New Guineans the way IMF and World Bank were pressurising the Government.

ANDREW FOWLER: Powerful forces wanted the bank, with its highly questionable lending practices, to stay in public ownership.

DR TIM CURTIN: There’s some evidence that there were politicians behind this and that the politicians, of course, were aghast that the previous source of soft loans was going to dry up.

ANDREW FOWLER: So the very people that stood to lose were supporting the students, as they were, you were saying, being used?

DR TIM CURTIN: That’s right.The students were used, in my view.

ANDREW FOWLER: Instability caused by the shootings created further urgency.If the bank didn’t give PNG its money, the Morauta Government would be in trouble.

DAN WEISE: The loans needed to be disbursed before the end of 2001 otherwise the government would face a cash flow crisis.
And to have a crisis leading up to the elections, the government would fall.

ANDREW FOWLER: In August, Morauta’s powerful chief secretary Robert Igara arrived in Sydney on a mission.The loan still hadn’t been paid out.Igara was furious.He headed to the 18th floor to speak his mind to the World Bank’s senior executives.
World Bank notes show that Igara, a public servant, demanded money be released “to support the government” in the run up to the “national elections”.Sir Mekere was due to face the electorate in mid-2002.He argued that despite political difficulties, reform was on course.He said he’d given new powers to the Ombudsman and Attorney General and investigated corruption in the National Provident superannuation Fund.

SIR MEKERE MORAUTA: I took on National Provident fund closer to home.Many, many, many important people were involved, many people — access to power — ..I finished it very well, and I’m very proud of it.

ANDREW FOWLER: Morauta had more than halved inflation, lifted low foreign reserves and stabilised the currency.
Recalling the chaos of the Skate years, Australia still saw him as the best hope.

SIR MEKERE MORAUTA: That’s where we were.

I came — that’s the scene I took over.And, uh, why World Bank came, why Australian government helped, Chinese, Japanese — ?
It’s because the policies that I put in place quickly to undo the damage, to rebuild the state and the nation, appeared —
..appeared to be worthy of their support, and that’s exactly what’s happened.

ANDREW FOWLER: But Dan Weise takes a harsher view.He feels Morauta missed a unique chance to turn PNG around.
Late last year he was still travelling to Port Moresby, still pushing for reform, when the PNG Government moved to restrict his activities further.This time the World Bank didn’t back him, and he resigned.

DAN WEISE: I didn’t agree with the path that they were heading, for quick disbursement of the money.
And I didn’t agree with, uh, not being able to do the job that I had originally been asked to do, which was to monitor the program.
But if I couldn’t talk to anybody, how could I monitor the program?

ANDREW FOWLER: The final trigger to release the loan was the bank privatisation.The government had found a buyer — the small PNG-owned Bank of the South Pacific.It wasn’t the strong, independent shareholder Weise had in mind.

DAN WEISE: In many respects you could look at this merger between the small Bank of South Pacific with the big PNGBC as the nationalisation of the Bank of South Pacific.

ANDREW FOWLER: The International Monetary Fund, which worked alongside the World Bank in PNG, also questioned the deal.
A confidential IMF document expresses concerns that “the public sector will still have substantial interest “in the merged bank”.

DR TIM CURTIN: Although the government, in a sense, has seats on the board of the Bank of South Pacific through those pension funds, it doesn’t, in any measure, have a controlling interest.So I think that’s a bit unfair.

ANDREW FOWLER: The World Bank ticked off on the sale and PNG received the final payment of the loan.Last December, in the wake of the decision to pay the loan, Weise travelled back into PNG on personal business.Weise says he received a warning involving Lady Roslyn Morauta.

DAN WEISE: Australia had intercepted a call from Papua New Guinea from the Prime Minister’s wife to an official, which indicated to us that they were seeking to ban me from the country.The information provided to me was that, uh, that she thought, uh, that she in fact instructed the official to ban me from the country, and that’s — those were the words.That I should be prevented from coming to Papua New Guinea.And the indications to me for the rationale behind it was that the government had, uh, uh — the feeling that I was, uh, somehow involved with the Opposition, which I was not.This was very distressing.And it proved to be correct, because a matter of weeks after that I was, uh, I was removed from the airport in Port Moresby and put on a — put on a plane to Cairns, despite having a valid visa.

ANDREW FOWLER: Weise also claims sources have told him the Australian High Commission helped assess whether Australian intelligence should intercept his phone calls.

DAN WEISE: They believe that I was working against the interests of Australia and, er, that the Australians, too, had been informed that I was working for the Opposition.And, you know, that’s an amazing — Even if I was, you know, to me, that’s not a criminal activity.But I was not, in any case.

ANDREW FOWLER: Weise says he was told the interception of his telephone calls did not proceed after staff in the High Commission interceded on his behalf.As Sir MekereMorauta went to the polls his government dug a defensive bunker.
Major Australian media outlets, including Four Corners and ABC News, were not granted visas for reporting on the election campaign.PNG nationals appearing in this program flew to Cairns to speak to Four Corners.We were eventually offered an interview with the prime minister over a phone line from Port Moresby.

SIR MEKERE MORAUTA: I think Papua New Guineans are generally fed up and for a very good reason.For what appears to be an insatiable appetite by the Australian media, you know, to sniff around for odour.All the good smells seem to go past and the bad ones get — get explored further.

ANDREW FOWLER: Morauta will be judged on whether the loan has created an extra debt burden or has helped the economy grow.

PROFESSOR ROSS GARNAUT: I think the, er, budgetary outcomes under the Morauta Government have been solid.They’ve met his objectives of economic stabilisation.

SIR MEKERE MORAUTA: The World Bank and IMF program — the first time in this nation’s 27-year history — we’ve successfully completed them.And in fact, World Bank and IMF have even commented to other people that in their experience not only that I have completed the program successfully.That I am following the discipline that I helped establish with their support.
Now, that’s a very rare trait in the world of developing countries.

ANDREW FOWLER: Yet a record from a recent meeting of a PNG treasury and finance committee tells another story.
The government is falling further into debt.Instead of a surplus it reveals a budgetary shortfall of about $160 million.

PROFESSOR ROSS GARNAUT: It wouldn’t surprise me to hear that, er, revenue is well below forecast.

ANDREW FOWLER: 360 million kina?

PROFESSOR ROSS GARNAUT: 360’s very large, yes.

ANDREW FOWLER: Does that surprise you?

PROFESSOR ROSS GARNAUT: I wouldn’t have thought the outcome would be as large as that.

SIR MEKERE MORAUTA: That document did not come from Chief Secretary.It has no status.It was written by someone who had heard some discussion.Must have been a by — signed by the Opposition parties to write for them.Someone who has displayed total ignorance of the processes of budgeting and the — and the management of the budget.

ANDREW FOWLER: The document also warned that in 2002 PNG’s budget problem was now heading towards crisis proportions.

DR TIM CURTIN: Had the money gone directly into productive activities those productive activities would, in principle, generate the surplus needed to pay back the loan.

ANDREW FOWLER: So it’s a debt for the future, for the future —

DR TIM CURTIN: A very substantial one.

ANDREW FOWLER: It becomes a cycle of debt, does it not, where you can never quite get yourself out of that?

DR TIM CURTIN: The World Bank’s lending is as much the problem as it is the solution.  What’s — creates a future problem particularly if it does not succeed in expanding the economy.And the Papua New Guinean economy has contracted over the last five or six years.

DAN WEISE: The disbursement of those monies were meant to fund a reform program that was aimed at improving the prospects for economic growth and poverty reduction.The alleviation of poverty.Er, in my view, er, they have not been achieved.
Those ends have not been achieved because the PNG economy is in recession, if not depression, and it’s deepening.

ANDREW FOWLER: PNG is in the middle of what many see as its most important election since independence.
Sir MekereMorauta spent much of his campaign desperately defending the economy.

REX PAKI: Every corner you turn, there are mothers, fathers, kids, selling beetle nuts because that’s the only form of income to survive that night.When I see kids’ mothers having difficulties to survive, those things break my heart.That is why foreign press, which you get into the country, see the conditions of the people, living conditions.Sorry, I get emotional when, you know, when I discuss these things.

DAN WEISE: People should ask the bank to investigate the matter, because this is precisely what the demonstrations all over the world are accusing the bank of doing — putting countries in debt and not, you know, aiding and abetting regimes that are not reformist, that are not trying to get the economy to grow, and then forcing them to repay these debts.
This is what — this is what the bank is criticised for, and I think Papua New Guinea and the recent loan is a very good example of — of what the bank should not be doing.

ANDREW FOWLER: The World Bank declined to be interviewed for the program.The Australian Department of Foreign Affairs also declined to comment.The post-election period will see furious political trading over who leads PNG’s five million people.
Australia’s preference for Sir MekereMorauta as the only real option will backfire if habitual plotting throws up a regime even less open to real reform.Then, Australia and the World Bank may only be able to watch on.

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Parliamentary Gardens

In 2003 the Parliamentary Accounts Committee was asked by Parliament to conduct an investigation into alleged corruption in the Parliamentary Service. The Committee submitted its report in September 2003 after summonsing witnesses and hearing evidence given on oath.

The PAC investigation found Justin Tkatchenko’s company Kitoro No.33 was awarded a K1.5 million contract to maintain parliamentary gardens, in breach of procurement procedure. The Kitoro tender was received 3 months AFTER the closing date. The tender submitted was only for twelve months but a three year contract was awarded. The original contract amount of K490,000 was K190,000 above the limit imposed by the Public Finance Management Act. The lowest bid for the project tender was just K12,000 per year. Kitoro was awarded contract totalling K837,738 that did not go to public tender.

The PAC recommended the contracts with Kitoro No.33 be terminated immediately and the officers responsible for the tendering, awarding and executing of the contract face ‘appropriate action’.

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PNG takes in Jakarta fugitive Joko Tjandra

AN Indonesian tycoon who fled Jakarta a day before he was sentenced to jail for fraud by the Supreme Court, and who is on the Interpol wanted list, has been granted citizenship of Papua New Guinea at a secret ceremony.

The constitution and associated regulations of PNG require new citizens to be resident in the country for eight years. They also include a number of other stringent conditions, including strictly policed financial probity.

JokoTjandra, 61, was first charged with corruption in 1999, over $57 million which he allegedly received illegally via PandeLubis, who was the deputy chairman of the Indonesian Bank Restructuring Agency set up following the Asian financial crisis.

Pande was convicted in 2004 and jailed for four years, over his misuse of Bank Bali funds. Joko was acquitted.

But under a new chief justice, the Supreme Court granted the prosecutor’s request for a review of the case. As a result, in June 2009 former central bank governor SyahrilSabirin was jailed for two years.

Two days later, and a day before Joko was to return to court for its verdict and possible sentencing, he fled. The court this time convicted and sentenced him, also to two years’ jail, in absentia.

He was ordered in addition to repay the $57m he received over the sale of Bank Bali debt collection rights.

He flew in a private jet to PNG, where associated family members own a large conglomerate, Papindo Trading, which is an especially large retailer, owning Super Value Stores, and which has recently bid to lease 100,000ha in Central Province for a rice-growing project.

When Joko fled, Indonesian Attorney-General’s Office spokesman JasmanPandjaitan said: “We’ve asked Interpol to help us to bring Joko back to serve his sentence.”

It is believed that he has split his time since then, chiefly between Singapore, Malaysia, Dubai and PNG, travelling by private jet.

Late last year, he is understood to have been flown in a Falcon jet between Malaysia and PNG, necessitating travelling over Indonesian air space – and provoking a diplomatic incident.

The Falcon was originally owned by the PNG government when Michael Somare was prime minister, and was sold and leased back to the government after Sir Michael lost office last August.

A week ago, 11 people, from six countries including Australia, were granted PNG citizenship at a ceremony in the state function room of Parliament House.

Joko, the 12th person to be awarded the honour last week, was not present. But it is understood he received his citizenship documentation in private, before the ceremony.

The citizenship was awarded only a few days from the start of voting, on Saturday, in a tumultuous national election, when PNG is at its most distracted.

The Post-Courier newspaper asked in an editorial: “Who endorsed Joko’s application for citizenship? Is it true that Prime Minister Peter O’Neill tried to stop the presentation of the certificates?

“We have not only given refuge to an international fugitive but given him citizenship. What are our international obligations? PNG’s image is at stake.”

[SOURCE: ROWAN CALLICK, ASIA-PACIFIC EDITOR, THE AUSTRALIAN]
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