Cooperation between Papua New Guinea and the European Community
by John LOFTUS
Papua New Guinea, the largest Pacific ACP State in land area and population, is also the most diverse in character. Development plans have therefore to overcome the problems presented not only by separation by sea and rugged terrain but also by the heterogeneity of its peoples, speaking over 700 identifiable languages and living in 20 mainland and island provinces.
Since May 1977, Papua New Guinea has been linked to the European Community, initially through a special arrangement for the application of the Lomé I trade provisions. It became a full partner in cooperation following accession to Lomé I on I November 1978.
Through successive Conventions, the cooperation relationship has been significantly strengthened, to such an extent that the European Community is now one of the most important of Papua New Guinea's development partners.
The various instruments of cooperation available under the Lomé Conventions have been called upon and utilised in accordance with the country's needs. The technical and financing programmable allocations for funding projects have seen significant growth from Lomé I (ECU 10m) through Lomé II (ECU 23m) and Lomé III (ECU 34.5m) to Lomé IV (ECU 40m).
The content of the programmes under which the sums have been spent reflects the major obstacles to be overcome in development of the nation. The major thrusts in the first two Lomé Conventions were accordingly in road improvements (53%) and education and training, as may be seen from Table 1.
Apart from the road network on the New Guinea side of the mountainous divide, which links Lae to the Highlands provinces, there is no usable road link between provincial capitals and other main centres. Nonetheless, Lomé cooperation has prudently concentrated on the phased improvement to full bitumen surfaced standard of the existing roads, particularly those radiating from Port Moresby. This policy continued under Lomé III, where a more noticeable sectoral focus was introduced.
Not unexpectedly, the concentration was on rural development, in which opening up rural access by all-weather roads again figured prominently.
Upon completion of the Lomé III, Sysmin-funded Road and Bridge Rehabilitation Programme, some 148 km of roads will have been upgraded to bituminous surfaced standard: 51 km from Laloki- Brown River- Veimauri, northwest of Port Moresby (Lomé I & III); 38 km from Tubuseria-Vailala-Rigo, south-east of Port Moresby (Lomé II & III), both in the Central Province; 29 km of the Kimbe-Talasea road in West New Britain (Lomé II) and 30 km of the East Sepik road from Passam-Tuanumbu (Lomé III Sysmin).
The importance of improving the life of ordinary villagers, who make up some 85% of the population, was given emphasis in the Lomé III micro-project programmes.
Twenty-three microprojects were completed under the successful Lomé III programme, all emanating from local community initiatives meeting recognised social, economic, health or infrastructural needs. Projects ranged from building school classrooms and health centres to upgrading a boat-building yard, fish farming, commercial guest houses and agricultural production and water supplies.
A microproject programme devoted entirely to providing water supplies to village communities in five provinces is also in progress.
Training in the rural development context was also a feature of the Lomé III programme, with added stress on courses in agriculture and the petroleum industry conducted in Papua New Guinea by specialists from Europe.
Training awards for academic courses overseas also continued, bringing to over 300 the number of Papua New Guinea nationals who have undergone tertiary training at post-graduate level in the European Community.
A major departure from previous ACP/EC cooperation practice was the agreement that Lomé IV should be valid for 10 years instead of the usual five, with the exception that the financial protocol should run for five years. The first Lomé IV National Indicative Programme was signed in March 1991 and concentrates on two focal sectors; human resources and rural development. The former, expected to utilise about 50%, covers possible support for the University of Papua New Guinea in Port Moresby and the University of Technology (UNITECH) in Lae, tertiary and other secondary institutions as well as teacher-training and other training courses (see Table 2).
Rural development is expected to embrace a further micro-projects programme and provision of rural electrical energy in the form of mini-hydro and solar power facilities. The mini-hydro power plants will generally be on a smaller scale than the one at Tari in Southern Highlands Province, successfully completed in 1989 under Lomé II, which supplies energy for 24 hours a day compared to the four to six hours of the diesel generator it replaced. There is also provision for a major scheme to conserve Papua New Guinea's tropical forests.
Other, non-focal sectoral measures include a project to develop a capacity for monitoring the environmental effects of mining and a trade and investment promotion programme.
Structural Adjustment and Sysmin
A most important innovation in the Conventions is structural adjustment. The Government was forced to accelerate an adjustment programme following the closure of the Panguna copper mine in North Solomons Province (Bougainville Island) in 1989 which resulted in a loss of more than 30% of the nation's export income and of considerable revenue in taxes and royalties.
The adaptability of the Lomé Conventions was demonstrated in the response to the need for balance of payments support by the approval of ECU 5.5m under Lomé III to fund a sectoral import programme. Here the Bank of Papua New Guinea, the central bank, played a prominent role in facilitating the purchase of foreign exchange by Papua New Guinea importers, there being no restrictive import licensing system in Papua New Guinea. The counterpart fund was used to narrow the national road maintenance budget deficit worsened by the Bougainville mine closure.
The Government was also obliged to seek the assistance of the Lomé III Sysmin facility, to which a further positive response was forthcoming in the approval of ECU 18m for support of the economy outside North Solomons Province because of the impossibility of implementing projects under the conditions prevailing there. A further sum may be made available for projects in the province when conditions permit.
The amount of ECU 18m was allocated to road infrastructure to permit rehabilitation of roads where the budget deficit has prevented long term maintenance being undertaken. Unspent Lomé II balances totalling up to ECU 3.5m were added to this sum to fund the Roads and Bridges Rehabilitation programme. This involves upgrading 30 km of road in East Sepik Province, resurfacing 500 km of the major national roads and replacing six bridges in various provinces. Up to ECU 3.5m are for spending on countrywide rural road drainage by labour-intensive methods to help alleviate the effects of unemployment, a consequence of structural adjustment.
The introduction of the adjustment process in Lomé III has been continued and magnified in Lomé IV. Papua New Guinea automatically qualified for Lomé Structural Adjustment support since it already has an agreed World Bank/IMF plan in operation. A Lomé IV Structural Adjustment facility allocation of ECU 7m was agreed by the European Community and this has been augmented by 10% of the NIP (ECU4m). These funds are financing a 'General Import Programme' with the counterpart funds generated making up the education sector deficit in the 1992 National Budget.
Project spotlight- Rural water
The EEC rural water project in Central Province is an integral part of a continuing battle to bring clean and plentiful supplies of water to rural villages in the area. In a tripartite agreement involving the European Community, the Provincial Government and individual villages, the EC is supplying equipment to the value of K453 000 to assist in the installation of solar powered pumping systems. Thirty selected villages benefit from the scheme. Similar projects are being carried out in Sepik and East New Britain. The project is managed by a provincial manager who coordinates a small workforce of five men. It is the manager's responsibility to liaise with village councillors in order to pick work teams of village people who will carry out the l bulk of the manual labour involved. This may mean hand-digging six-metredeep wells or trenching out for up to, seven or eight kilometres of pipework!
Once this establishment work has been' completed, the provincial work team moves in with PVC and polythene pipes made in Papua New Guinea), solar panels and pumps and fits all the pieces together to allow water to be pumped to tanks. These tanks, supplied by the EC, are also made in PNG. In most cases, the water tanks then gravity-feed pipes which run to supply tap-stands in the village. The village women come to these with their plastic containers to collect their water for the day.
The water which flows from the new systems is usually crystal-clear and more pleasant to drink than city water. For the women, the time saved during their working days must run to many hours — an average round-trip for water before the new system was introduced was two kilometres and in some cases it was as much as eight kilometres. Now, the average distance to the water supply is only 50 metres.
The number of people benefiting from the project is approximately 30 000, although more accurate figures are hard to establish as all the villages have fluctuating populations.
Central Province has a number of other water supply projects which do not involve solar power. Mainly rain-catchment and handpump schemes, they are coordinated by the Provincial Health Inspector. Similar projects are being carried out in East Sepik, East New Britain, Madang and Milne Bay Provinces.
David NEWTON, Provincial Project
Stabex has proved to be another vital instrument in balance of payments support by helping to make up for the reduction in foreign exchange earnings from agricultural commodities, ie coffee, cocoa, palm oil and coconut products, caused mainly by lower world market prices in recent years.
Papua New Guinea has to date received ECU 153m from the Stabex provisions of the four Lomé Conventions (Table 3), making it one of the biggest Stabex beneficiaries. The transfers have been used for crop improvement, for agricultural diversification or to support producer prices in the four crops.
The most recent transfer, in respect of 1990, is being used to finance government price support on a reducing scale planned to reach zero within three to five years in accordance with an agricultural plan conforming to the structural adjustment process. An important step was taken by the Commission in 1991 in the conversion to grants of all existing Stabex transfers. All future Stabex transfers will be grants, as are all NIP allocations from Lomé IV.
These measures are aimed at maintaining and improving Papua New Guinea's trading position. The country has consistently experienced a strong balance in its favour as far as trade with the European Community is concerned. (Exports ECU 256m, imports ECU 97m in 1989).
European Investment Bank
Valuable loan funding for appropriately viable projects has been made available through the European Investment Bank (EIB). Concessional loans totalling ECU 113m receiving an interest rate subsidy have been agreed for support to projects such as palm oil production (Higaturu and Poliamba), Ok Tedi mine and the Yonki-Ramu hydro-electric scheme.
An indicative amount of ECU 30m was agreed for inclusion in the Lomé IV National Indicative Programme by the EIB.
The most recent EIB intervention and the first contribution from Lomé IV provides a total of ECU 8m (tome IlI- ECU 4m, Lomé IV-ECU 4m) own resources loans and ECU 2m (tome IV) risk capital as a global loan facility in support of small and medium-sized commercial enterprises. The scheme is man aged by the Bank of Papua New Guinea through the agency of the local commercial banks.
Other notable forms of assistance provided were for an AIDS prevention programme and aid to refugees at the camp at East Awin in the Western Province. Food aid totalling ECU 0.8m was provided under Lomé II in the form of 1200 tonnes of rice, 160 t of canned fish, 30t of milk powder and 12t of vegetable oil.
A further 400 t of rice was provided under Lomé III. ECU 730 000 was made available under Lomé III for road construction and maintenance, supply of transport equipment and building of five schools with emergency water tanks. A telecommunications link from this rather remote location has also been installed.
Papua New Guinea received assistance valued at ECU 800 000 from the ECU 35m European Community global AIDS programme in the form of an STD specialist technical assistant, provision of laboratory equipment and funding of seminars and surveys. The technical assistant helped to prepare Papua New Guinea's current medium-term AIDS prevention programme.
Outside the scope of the Conventions, support has been given by the European Community to many small projects through non-governmental organisations. Up to 50% of the value of such projects may be financed.
Allocations of funds have been reserved under the Lomé Conventions to finance regional programmes. The eight ACP States in the Pacific have benefited from the Lomé II (ECU 34m) and Lomé III (ECU 39m) programmes. The Lomé IV regional allocation has been set at ECU 35m. The Regional Indicative Programme was signed in Suva on 28 February 1992 by the Commission and the eight Pacific ACP States.
In Lomé III, the major projects which are of particular interest to Papua New Guinea are the Pacific Agricultural Programme (ECU 6.8m including sweet potato cultivar research), the Pacific Marine Resources Development Programme (ECU 10.7m-determination of mineral and fishery resources including a tuna tagging programme) and the Pacific Tourism Development Programme (ECU 7.4m).
Through the four Lomé Conventions, assistance valued at more than ECU 400m (Table 4) has been made available to Papua New Guinea in various forms as major and valuable contributions to overcoming the natural and economic obstacles in its path to developing a better future for its growing population.
Taking account of these difficulties and the brief length of time of its very existence as a unified and independent state, Papua New Guinea has achieved much, managing its affairs in the interests of its people. To its great credit it has done so whilst continuing to embrace the cherished principles of multi-party democracy enshrined in its constitution.
This gives added justification for the cooperation bond between Papua New Guinea and the EC, a bond which continues to strengthen and mature, as reflected in the agreement in 1991 establishing the European Community as a full diplomatic partner under the Vienna Convention. J.L.
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