Addressing The Economic Dilemma Of Scarcity In PNG With The ‘Hub Model’ Of Development

I read with interest Governor Bird’s pondering as he attended some ‘ribbon cutting’ ceremonies in Morobe Province and put together his thoughts afterwards, which he posted on his Facebook Wall. Three (3) themes caught my interest in his strategy discourse.

1. Governor Bird’s appointment to the ‘Public Sector Reform Committee’ to be headed by Governor Juffa. On this appointment Dulciana Somare Brash commented that “Allan Bird [and] Gary Juffa are the most decent forward thinking leaders in our country [at the moment]! We need fearless men with a moral compass to guide our nation on all major national issues.” As is usual with such moves with the right leaders and the level of thrust and confidence now place on our two esteemed leaders, you can expect some changes to happen and prime among these changes will be the expectation to cut public/State servants numbers. But, this is not going to be a straight forward solution.

2. Governor Bird emphasising on the need to become an ‘independent’ people. “Our people need to become active participants. Utilizing their own resources to enhance their lives, becoming less dependent on government. They need to be more productive. They don't need a university degree even though that is desirable but simple knowledge and skills that they can apply to their land, forest or fishery to create value for trade.” I also share the same sentiments.

3. The main body of his narrative was about dealing with the dilemma of economic scarcity and opportunity cost, especially with the scourge of COVID-19 and whether we should rethink our development models, thus sacrificing some developmental aspirations given the current situation we are in at the moment.

Point number three (3) above is of particular interest, especially as Governor Bird was articulating PNG’s development aspirations and a possibility of how to deal with our dilemma with the economic phenomenon of development funds scarcity. While one can be empathetic with others’ perception of bias in service distribution, we should also be concern about spreading the limited State resources thin around our country without achieving the 'small baby step milestones' that will set us up well and enabling a greater strategic reach (and futuristic focus) for our country.

The model of physical development in Governor Bird’s narrative is that of ‘central hubs and satellites’ and this is to manage efficiently this economic dilemma of resource scarcity and equitable service delivery (or opportunity cost). This, I can recall, was also the model mooted by the previous GoPNG of PMPO where it was proposed that the four regions of the country: Highland, Momase, Southern and NGI, where to head up specific key development areas/agendas.

So What Is The ‘Hub’ Approach To Development?

The hub model of development arranges key services into a central location consisting of an anchor establishment (hub province) which offers and services secondary outlaying pools of provinces. The previous GoPNG of PMPO split the country up and termed these as ‘corridors’ with specific development functional areas and work on improving access (like the GoPNG project on Connect PNG by Road Link). Obviously some provinces categorised as ‘satellite hubs’ may feel unfairly about this but this I believe is the way forward when dealing with the challenges of scarcity and opportunity costs.

Governor Bird in his narrative stated that “for the moment, Morobe [Province] is leading and is an interesting template under development. While we are all competing for development in all our districts and provinces, it would not hurt to develop 2 or 3 provinces ahead of the others as major engines for economic growth.”

He wrote that he had often argued in Parliament about the need for strategic development in strategic locations. “Not everywhere all at once but in strategic locations to facilitate economic growth and development. That way we can create economy of scale [a proportionate saving in costs gained by an increased level of production] and achieve better cost effective outcomes AND create jobs and opportunities.”

It is all about sharing the limited resources of the State ‘equitably’. But still there will be others who are bound to rightly feel being unjustly served. This is because sharing the benefits equally is not necessarily fair. Such feelings are that of defeat and despair that breeds pessimism and alienation. But we should take encouragement from the ‘Good Book’ which also reinforces this principle too (of learning from the mistakes of those that went ahead of us) that ‘husait yu laik kamap namba wan, yu mas kam last’.

Equality Isn't Fairness But Equity Is Fairness

The two key objectives of government are:

1. Social Efficiency (benefits of producing something must be greater than its cost to society) and

2. Equity Considerations (society's resources are fairly distributed and shared by all).

GoPNG and its agencies, in trying to obtain an optimum balance between its two objectives, will find it not possible to please everyone in the distribution of goods and services. Again, this is because sharing the benefits equally is not necessarily fair. There will be some who are already at an advantage than others. Equity considerations in governing objective is about sharing the benefits accordingly to close the gaps to benefit all equally. In such cases, equality is not fairness but equity is.

The above two objectives of government of social efficiency and equity consideration come about due to scarcity (or limited resources but endless demand) and the opportunity cost considerations. To manage these limited resources and meeting its objectives, the GoPNG has been leveraging off the 'hub model' where a certain group of provinces are considered ahead of other provinces with facilities to eventually support the growth of other satellite provinces. I am of the view that this is a fair and equitable undertaking given the challenges and risk of spreading our scarce resources thin.

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I am usually loathe to attend ribbon cutting ceremonies. On this occasion witnessing the launching of various projects in Zifasing, Huon Gulf by the PM on invitation by the Hon Ross Seymour gave me an educational look at Morobe, a place I had not visited in 3 years.

Gracing the occasion was a spry GC Michael T Somare, 84 years old and still much loved by the people.

Sharing a ride from Nadzab to Zifasing with the Hon John Rosso MP for Lae and listening to him speak about their plans for another city around Nadzab I began to imagine what that would look like.

Morobe province holds much potential for our country. It has probably the best developed Port in our country, the airport is currently being upgraded, Angau Hospital is being upgraded, the roads are being upgraded, etc. There is significant government investment in Morobe generally, not for Morobe but for PNG. Hopefully this will lead to greater opportunities for all our people in Morobe in future.

This is a critical point. There are few places in our country that have the potential for large economic growth, especially in Agriculture and for large urban centers as well. I believe the Sepiks, Madang, Western, Gulf, have similar potential (ports, land, sparse population).

For the moment, Morobe is leading and is an interesting template under development. While we are all competing for development in all our districts and provinces, it would not hurt to develop 2 or 3 provinces ahead of the others as major engines for economic growth.

I have often argued in Parliament about the need for strategic development in strategic locations. Not everywhere all at once but in strategic locations to facilitate economic growth and development. That way we can create economy of scale and achieve better cost effective outcomes AND create jobs and opportunities.

In the last 15 years or so our focus is service delivery but with COVID19 and a worldwide economic recession on foot and expected to last at least 5 years, we need to rethink our previous development approach. Do we keep doing the same things and hope that change occurs?

2020 is a terrible year for PNG with our largest single single deficit ever: K5.7b. At the same time our economy will shrink by around K10b. Our public service wage bill is now K5.6b, that's a third of our total budget. In just 8 years our wages bill grew by K2b. Scary numbers.

The entire world is in recession. Our best friend Australia is looking at their largest deficit since WW2. Their deficit this year is 100 times ours at around K500b. So that gives us some perspective.

Government has committed to spend K1.2b a year in SIP funding annually and this fund appears to be our best hope for new investment in our economy if spent properly.

In any case, the PNG people deserve better outcomes from our public spending. Not just roads, bridges, wharves, classrooms and health centers. Not just sporting activities. Our people need less crime, more jobs and business opportunities. Our people want to be healthy, happy and live more meaningful productive lives.

Our people need to become active participants. Utilizing their own resources to enhance their lives, becoming less dependent on government. They need to be more productive. They don't need a university degree even though that is desirable but simple knowledge and skills that they can apply to their land, forest or fishery to create value for trade.

In order to do that, we need better outcomes from our budgets. We need to either cut back our huge public wages bill or make sure it's producing better results for our people. Government cannot afford to keep spending money with very little benefit for our people. That would be irresponsible and negligent.

To that end, I wish to thank PMJM for appointing me to the Public Sector Reform Committee headed by Gov Juffa. It is my sincere hope that we can review and change the way we are expending public funds for the benefit of our people.

That way people in Morobe, Sepik and other parts of the country can live and work in an environment in future where they have income opportunities, access to better services and they are free from the ever present threat of criminal attacks.

COVID19 has been a scourge and a blessing in disguise for us. It has exposed the serious weakness in our public service, our lack of good governance and our poor management of public funds.

In the past we have been able to hide these weaknesses by clever accounting and manipulation of GDP and other data through the compromise of the heads of many of our watchdog institutions.

COVID19 has made it impossible for anyone to hide anymore, it has revealed every hidden sin. It's time to change.