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Changing the Path to Development in Papua New Guinea

The Oakland Institute Policy Director Frederic Mousseau joins to discuss how despite an abundance of natural resource wealth, Papua New Guinea’s reliance on large scale extraction projects has failed to provide development for its people. Instead of allowing foreign corporations to evade taxes and bank profits offshore, PNG must change course to provide people centered development.

 


Transcript

As a leading policy think tank, the Oakland Institute is bringing fresh ideas and bold action to the most pressing social, economic and environmental issues of our time. In partnership with impacted communities, we research and document threats to land rights, livelihoods and natural resources and develop communications and advocacy campaigns to support and elevate these struggles in the international arena. On this show we will summarize our research and advocacy efforts through interviews with report authors and partners from communities around the world.

Underlying all the work of the Oakland Institute is our strong commitment to elevate the voices of farmers, pastoralists, fisherfolk, Indigenous Peoples, and all communities who are marginalized and repressed in the name of development. After all, the poor are the experts on poverty, the oppressed are the experts on human rights and peasants and rural communities are the experts on agricultural development. My name is Andy Currier – I’m a Research Associate at the Oakland Institute and will be today’s host.

The island nation of Papua New Guinea will be the subject of today’s episode. One of the most culturally diverse countries in the world, PNG has over 800 indigenous languages. With a heavily rural population, Papua New Guineans have been able to maintain traditional lifestyles based on a mix of cash crops and subsistence agriculture, hunting, fishing, and gathering. The majority of its inhabitants live in small communities of a few hundred villagers who maintain a close relationship with the land and natural resources.

PNG is home to the world’s third largest rainforest and numerous endangered plants and wildlife species. However, despite an abundance of natural resource wealth, PNG‘s economic and social development has failed to match peoples’ aspirations and government promises since independence in 1975. This can, in large part, be attributed to the development path that successive governments have pursued: rather than a people centered approach, PNG has pinned its development plans on large-scale resource extraction. In pursuit of this goal, PNG has allowed some of the world’s largest mining, petroleum and timber companies onto its shores to extract gold, silver, copper, nickel, oil, natural gas, tropical hardwoods and palm oil.

Today we’re going to explore why PNG‘s natural resource wealth hasn’t led to greater development for its people. I’m joined now by Frederic Mousseau, Policy Director at the Oakland Institute and author of several reports that have exposed illegal logging, tax evasion and efforts to privatize customary land in PNG. We’re going to discuss the findings of “From Extraction to Inclusion” the recent joint publication from Act Now, the Jubilee Australia Research Center, and the Oakland Institute that calls for a radical policy shift away from the failed natural resource extraction strategy and towards in approach focused on people-centered development.

Andy Currier (AC): Thank you for taking the time Frederic. Before we get into the findings of the report I wanted to backtrack a little bit. For some of our readers, PNG might not be a country that’s really on their radar given the lack of international news coverage. Despite its smaller population, the country has been the subject of numerous Oakland Institute reports. I wanted to start by hearing how the Oakland Institute first became involved in PNG and then some of the first impressions you had when visiting the country.

Frederic Mousseau (FM): Thank you Andy.

We became first involved in 2012 after receiving calls from local communities in PNG that there were massive projects of logging and palm oil that were under way to some 5.5 million hectares earmarked for such projects. So we decided to go and see what the Institute could do about it and we ended up making a film and a first report that was documenting this massive land grab that was taking place.

“There is small-scale agriculture, but the attachment to these natural resources is something you don’t see in many places in the world. So their struggle for their resources and their land was so important, you could really feel it was a struggle for their life.”

It was really distressing to visit communities at the time because the local populations were so attached to their land and natural environment and were feeling really powerless with these companies, but also with the government and police forces that were acting against them and letting these logging companies go through their land and take away their most valuable resources. And Papua New Guinea is an incredible country where around 97 percent of the country is customary land.

People really live from the forest and rivers and waterways. There is small-scale agriculture, but the attachment to these natural resources is something you don’t see in many places in the world. So their struggle for their resources and their land was so important, you could really feel it was a struggle for their life.

AC: Before the onset of the pandemic, PNG had been experiencing consistent economic growth. The report, however, is critical of this development path taken by successive governments. So what is wrong with looking at something like GDP and concluding that the natural resource extraction approach has actually been successful?

FM: Economic growth is most often measured with gross domestic product (GDP), which is the monetary value for the goods and services produced in the formal economy. However, GDP does not measure human development and wellbeing. It doesn’t account for the negative extended cost of economic activity like environmental damage or social unrest or negative externalities on the economy. And it doesn’t show how wealth is distributed either; GDP doesn’t tell us much about living standards for most people in PNG. But other measures are much more revealing. PNG is, for instance, among the highest of its Pacific neighbors in its poverty and child mortality rates and lowest in its position on the human development index, and access to healthcare. Access to basic services such as clean water, electricity is very low as well and child-malnutrition is rife throughout the country.

While there have been some improvements in recent years, for instance life expectancy has increased and access to education as well, these are really small gains in light of PNG‘s falling in so many other areas of human development. So it is crucial that we push back on this conception promoted by governments and international institutions that GDP growth is equated with development. It is not. As PNG demonstrates, economic growth does not necessarily benefit the majority of the people, and we see this made explicitly clear by the communities who have lost their land and failed to see any that’s not the city who is he most communities who lost their land and failed to see any improvement in their quality of life from the massive natural resource extraction projects that have been surrounding them for decades now.

AC: So, could you break down how relying on the natural resource extraction approach constraints PNG‘s development? According to the report, the mining and petroleum sectors currently account for around 85 percent of the value of exports from PNG. This is a major percentage and it must generate considerable revenue. Is this just an issue of the government misusing these revenues?

FM: Well, it is striking that natural resource extraction makes actually a relatively modest contribution to PNG‘s national budget. Most of the revenue and profit from natural resource extraction in the country is banked offshore. Between 1978 in 2016, the extractive sector made up, on average, just 13 percent of PNG’s total revenues, which is relatively low considering the high percentage of exports they account for.

AC: So this is corporations finding ways around paying their fair share in taxes?

FM: Yes, and its well documented. We’ve looked into this report produced in 2016 titled “The Great Timber Heist: The Logging Industry in Papua New Guinea”. Our investigation exposed massive tax evasion and financial misreporting by foreign logging companies. We saw, looking into their financial records, that they were not paying hundreds of millions of dollars in taxes. Actually, they were year after year reporting losses in their activities, even if they kept exporting and growing their exports year after year. And it has continued since, even after years ago when the country became the first exporter of tropical timber these companies were still reporting economic losses, reporting no profit in their activities which was really striking evidence of their misreporting and tax evasion practices. So this is costing the economy hundreds of millions of dollars every year.

“In recent years the good news is that as a result of this research, the PNG government has really tried to take action on this tax evasion by logging companies.”

In recent years the good news is that as a result of this research, the PNG government has really tried to take action on this tax evasion by logging companies. It has increased its log export tax, which is a percentage of tax the government takes on the volume of exports. This has led to a sensible decrease in timber exports as well as an increase in government revenues. As a result of these findings the government also sought international assistance to deal with the problem, which is a very difficult problem with these foreign companies having tax havens and all kinds of complex setups for their groups. So the government asked the assistance of the OECD, who agreed to send international auditors to PNG to help the government crack down on tax evasion. This happened last year.

The latest 2019 PNG budget also included additional measures to put more taxes on so-called “resource companies” to address the issues raised in our report. So we were really glad to see a direct impact of our report over the government attitude toward these logging companies and its attempts to curb tax evasion and to increase public revenue from these activities.

AC: That is an important point that is often overlooked. So rather than the government misusing this revenue, the structure of these deals actually results in less revenue than you would expect to see given the value of the resources extracted. And then when you add tax evasion to this it becomes clear why development hasn’t followed. It is heartening though to hear the reports have led to some action in cracking down on tax evasion. It’s especially crucial, as the government remains committed to attracting more private investment as its primary development strategy. So what types of private investment could actually contribute to development? What does this look like in your opinion?

FM: Yeah, of course we are not saying there shouldn’t be any investment. There should be investments that really benefit the country and its people, and what we have seen in recent decades is that logging and mining have had devastating human and environmental impacts on the country. We have also seen that there are very obvious alternatives to these extractive activities. For instance, establishing in-country processing of wood rather than allowing most of the timber to be exported as a whole log, basically they just cut the timber and put it in a boat that is going to China or somewhere else, mostly to China actually. There can be investment in this processing in the country so that there is domestic production and an added value to these natural resources.

There are also other ways to invest: investing in domestic trade, storage, transformation of agricultural and forest products is a key avenue that the government should explore. We can think of investment in high value export commodities such as cocoa and vanilla, which are big export crops for the country and crops that are produced by small farmers and don’t require the alienation of their land.

Supporting trade between highlands and coastal areas, between rural areas and the urban centers is also critical if one wants to avoid what we’ve seen in so many countries around the world. Like in Africa where rural peoples are impoverished, where farmers can’t make a living, where the urban population largely buys and consumes products that are coming from overseas. And quite often we see junk food and food that is new for the country and the culture. So preventing this to happen requires private investments which will have to be guided, supported, and incentivized by the government as well as some level of protection for the domestic markets from cheap imports of food.

So these are measures, strategies, directions that the government should take, even if so-called donors and international institutions will be in all likelihood resistant to these kinds of measures because they would be, as always, advocating for free trade and no protection of borders. But in the case of Papua New Guinea, we can really encourage the government to support its domestic production and its population which is 80 percent rural-living and relying on agriculture and fresh products for their livelihood.

AC: If anyone is interested in learning more about these options the report takes a deep dive into the evidence behind their effectiveness, I’d encourage everyone to give it a close read to learn more. So one thing about these alternative forms of investment that sticks out is that they don’t require privatizing or changing ownership over land. Despite these options though we’ve seen the PNG government continue to undertake a number of policies aimed at freeing up customary land to facilitate private investment in natural resource extraction. Can you first explain the importance of customary land in PNG and elaborate on how it’s under attack?

FM: So Papua New Guinea is a relatively new country as it got its independence from Australia in 1975. The new constitution for the country really upheld customary land tenure as a key principle and key asset for the country. Customary land tenure is a constitutional principle for the country and it’s quite unique in the world. 97 percent of the land today in Papua New Guinea is under customary land tenure, meaning that it is collectively held by clans, by tribes, and basically there’s no… what people say in Papua New Guinea is there’s no homeless in the country because everyone belongs to a clan or a tribe and everyone is entitled to some land. It’s a notion that may be very different for many of the readers, here in the US for instance, where we see so much homelessness and where private property of land is such an important principle. It’s really a completely different vision and different relationship to land in Papua New Guinea.

More generally, customary land tenure systems vary in different countries, and usually you have kinship groups recognizing and enforcing a system of land citizenship and usage rights, and usually they are passed on from generation to generation. So people in PNG don’t consider land as an individual property that can be bought or sold, but instead value it as a common good. It’s an ancestral asset with deep social and cultural significance. There are sacred sites, there are all kinds of beliefs and cultural attachments and customs related to the land and the forest. And all these have to be preserved for those living on the land today and relying on this land for their livelihoods, but also for future generations. And this is something that people in PNG have strongly in mind, they have this responsibility as custodians of their land.

Pursuing development by extracting natural resources has put customary land under attack. Between 2003 and 2012, around 5.5 million hectares of customary land passed into the hands of foreign corporations for logging and palm oil through a scheme that was introduced by the government called Special Agricultural Business Leases (SABL’s). It’s a legal mechanism known as a lease-leaseback system, where individuals can lease some parts of their land to the government and then the government will lease it back to a corporation that wants to develop certain activities on this land. So with this scheme in place, it’s some 12 percent of the total area of the country that is under threat and it’s more than that, over 15 percent, when you add it to logging concessions already given in the country. It’s a major attack on the customary land tenure system, and has been led by the government itself.

AC: So despite all the important reasons you’ve laid out there are people who push for changes to the system, arguing customary land should be unlocked for private enterprise. Proponents for this approach argue that private titles offer more security for individuals, allowing them to access credit and invest in their land as a catalyst for development. So this argument that you can increase tenure security with private titles and land markets, replacing customary land tenure systems and unlock the value of land for development holds considerable weight with international institutions such as the World Bank and development agencies from USAID to DFID. What are your issues with this argument?

FM: It is clear that land tenure security is vital. However, transforming customary land tenure into private titles is not necessarily the path to improve tenure security. There is much evidence from around the world, including comprehensive studies by USAID and the World Bank themselves showing that customary systems can provide adequate tenure security and that past efforts to convert customary systems into western private title systems can result in major social and economic displacement. So it is not a solution we really buy into, and research from around the world actually reveals that private titling has not actually increased access to credit and loans as is often the argument put forward by the promoters of this kind of reform.

“There is much evidence from around the world, including comprehensive studies by USAID and the World Bank themselves showing that customary systems can provide adequate tenure security and that past efforts to convert customary systems into western private title systems can result in major social and economic displacement.”

The often-repeated claim that private titles offer tenure security while customary systems remain insecure is actually not substantiated by evidence. The lack of evidence of development that comes with private titling, along with many examples of the detrimental impact on people and communities makes it clear that the privatization of land has nothing to do with fighting poverty or improving livelihoods. It is just another avenue for further colonization and exploitation of natural resources for the benefit of few private interests and corporations, and at the loss of the people.

AC: This was a major take away from the report for me: that rather than impeding development, customary land can actually improve tenure security without some of the risks associated with land markets and private titles. For more on the push to privatize land around the world and a gap between research and practice on improving land tenure security I’d recommend readers take a look at the “Driving Dispossession” report published by the Oakland Institute in July, which features PNG as well as several other case studies. Now, given the huge power imbalance between these large corporations and communities in PNG, how have people been resisting efforts to take their customary land? What form does this opposition take and does it make you optimistic for the country’s future?

FM: Citizens and communities all over the country have confronted these SABL’s and different land grab efforts in a number of ways, including public protest, civil disobedience, petitions, pursuing court cases to have their land returned to them or stop the logging companies. So the resistance is massive. The people have been really standing in the way, but unfortunately this resistance is also met with violence and intimidation.

In a number of cases, residents who tried to resist these deals through peaceful protests or roadblocks were arrested, beaten, relocated or moved to a jail far away in the provincial capitol. Actually, it’s important to know that police on the logging sites are actually hired by the loggers and are really working on their behalf to protect the logging operation.

In my different visits to the country, I’ve been humbled by the courage of the people who are standing for their land and natural resources, facing their own police and these foreign logging companies. It’s really humbling because you have people with very little support and very little resources who put everything into their struggle because of the importance of the forest and biodiversity for their livelihoods, but also aware that this is a fight for all of us.

These resources and biodiversity are key to protect for them, for their life, but for the rest of the world as well. I encourage you really to read the report titled “Taking On the Logging Pirates: Land Defenders in Papua New Guinea Speak Out!” which features a number of testimonies from these individuals who stand in the way of logging and corruption, and they are very poignant testimonies from different islands we visited. They explain their struggle, but also their motivations with this struggle and the kind of forces they are facing.

AC: So we spent most of the conversation exposing the natural resource extraction strategy as a neocolonial trap that PNG has fallen into. While foreign companies have benefited, development for the majority of the population remains constrained. I wanted to end with the path forward. So, from your research and years spent working with partners in PNG, what can the country do to provide people-centered development?

FM: It is really essential to preserve sustainable livelihoods and support the green economy that protects natural resources for future generations and is able to curb carbon emissions and climate change. The government of PNG must focus on a development path that serves people instead of one that takes the land away from them for corporate profits. The country has important assets: it still has a largely rural population living on their own land with the skills and ability to work, produce, trade, and innovate in a way that really improves their lives and those of future generations. PNG’s wealth of natural resources can continue to be the basis of people’s livelihoods provided these are managed by and for the people in a sustainable, responsible and wise way. The change of course requires important policy shifts for the government, which should start by halting its attacks on customary land tenure, which is the basis of the village economy and the livelihoods of most of the population.

The next step is to reject new large-scale resource extraction projects, at least until general reform of the government’s regime is accomplished. In the forestry sector, as mentioned earlier, abandoning round log exports is urgently needed, and is actually something that has been promised by the government for decades and never implemented. We should just stop exporting round logs that don’t benefit anyone except for these logging companies and the few individuals connected to them. Local communities must be placed at the heart of future forest management. Downstream processing of sustainably and ethically produced timber products should be the priority for the country. Halting the expansion of oil palm is another priority that must come with public policy and investment in appropriate agriculture that benefits farmers, feeds the country, and uses natural resources in a responsible way. There are hopeful signs that PNG policy makers have started now the necessary shifts in a much greater and coordinated government approach across all these sectors if we want these changes to happen.

AC: Thanks again Frederic for taking the time. Again for those interested the report is called “From Extraction to Inclusion: Changing the Development Path in Papua New Guinea”, a joint publication of Act Now PNG, Jubilee Australia and the Oakland Institute. All all the reports referenced can also be found on our website, OaklandInstitute.org. Thanks again for listening, until next time.