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23 August 2014

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Busa, what the government should do and what it actually does often seem to be two very different things.

It may not require an economist at Treasury to tell us that every government since Independence has squandered the wealth of this nation.

As for the pension, I remain skeptical that even an electronic system will function well.

Do I have a better idea? Yes, forget the pension, try fixing social services for access to health and housing, support programmes alongside those by church organisations (e.g. Missionary Aviation Fellowship) and NGO's (e.g. World Vision), improve statistics and information on rural poverty to identify households in need as opposed to individuals, develop location specific plans to address poverty.

My assumption is that the government is serious about addressing poverty and not just spreading the manure.

Michael, this is a government that is willing to hand down budget deficit eventhough it is now becoming very clear by the minute that the LNG revenue will not be enough to support all its spending programs.

This could explain the reason why the government is now looking at more LNGs in PNG. It is simply turning out to be race for development versus maintaining its level of popularity.

However, the saddest thing is that this is aided by a rapid resource extraction policy facilitated by the government's plan to invite more foreign direct investment by making more exploration and drilling licenses available.

The informal economy and agriculture, where the bulk of the people are, will wait for another 5 years or a decade or never to get some form of recognition.

This is no secret when our government is willing to roll-out red carpets for giant mineral, gas or oil extraction companies.

Our agriculture sector is still in a mess and, although the new Minister seems to be a progressive thinker, there is still much to be desired so far given that some of the policies being proposed thus far looks certain to work for the interest of certain foreign entities.

Unfortunately, it is the prerogative of the government of the day to decide what kind of direction it wants to take in leading this nation.

Economically speaking this government is the most pro Keynesian government that I have ever seen since probably the early post independence days.

Some guy at the Treasury Department needs to do a comparative analysis on the budget spending on a government by government basis to compare the current government's spending to the previous government on an average basis (assuming revenues from the LNG Project is held constant).

While at it they should also determine whether the Medium Term Fiscal Strategy and the Medium Term Debt Strategy has been adhered to.

They should also try to do a comparative analysis on the number of conditional and unconditional loans domestic and international, that this government has signed compared to other governments.

My gut feeling tells me that we have already gone past the required level of debt/GDP ratio.

For the pension scheme, as I have stated in the blog, it looks likely that the bulk of the funds will be coming from the LNG proceeds given that PNG has a very small formal sector/tax base.

If it still wants to tap into the Goods & Services and Personal Income Tax to sustain this program that would mean that tax rates will have to increase. If does not want to do that then it will rely on proceeds from big impact project like LNG.

Administratively, experiences in countries like Fiji have shown that physical disbursement of cash to pensioners puts so much pressure and strain on the administration.

However, through electronic disbursement, it will cut down on the administrative costs significantly. So there is evidence to show that it will make the administration efficient in disbursing funds.

Food stamps as I have mentioned are not a viable option given our rugged geographical terrain which has isolated the bulk of our communities.

However, in terms of managing the funds, it is hoped that there are clear and transparent guidelines and processes to ensure that the money does actually reached the needy.

The Government should ensure that it priorities the National Identification Project over other initiatives as I believe it will lay the foundation for other government programs such as pension scheme to bear fruit.

That means of course supporting infrastructure such as electricity, communication, internet, banking services, roads to name a few will have to be in place.

At the base, the village ward recorders who are mandated to update or profile individual person in the village, will play a key role in helping the government to identify potential pensioners. This needs to be backed up by a consistent M & E framework to ensure that there is integrity in the selection process.

Apart from that it should also increase its scope to undertake regular surveys or research to ascertain the impact of the scheme on the lives of the beneficiaries to minimise potential problems that could get out of hand.

Busa, we may have the kind of government that would give whiskey to a drunk alcoholic by providing pensions to people who have no savings culture.

I still don't believe that a pension system is workable, at least not without the savings culture and the financial literacy you've advocated.

In addition we need a more effective and efficient public service capable of operating the pension system, the much needed accountability of administration, establishing proper citizen registration systems (e.g. our census is not entirely reliable, national ID cards) and determining precise categories of pensioners (e.g. ol lapun na unemployed youth, foreign asylum seekers too, but not fellow Melanesians from West Papua?).


Supporting a national pension may be in line with your arguments for financial inclusion but I sincerely hope the existing systems and processes can be cleaned up before we embark on yet another major government spending program for which the public service or a private company (which costs more money to run) may be ill prepared.

Thanks Robert and Michael. In PNG, as I have argued in my blog, given the large size of the informal economy it is important that it is supported so that it can complement or supplement the pension scheme that the government is planning to establish.

The underlying reason for this is to ensure that productivity is not compromised.

By providing money to our people it is also important to ensure that they get to spend the money on what is necessary for their survival and not on unnecessary consumables like alcohol and activities such as gambling and so forth.

There is already clear evidence that we lack the savings culture coupled with poor management and planning skills when it comes to money or finance.

That is why the government needs to support the informal economy so that it can provide these people opportunities for them to be useful and productive and at the same time generate enough to meet their needs.

The government should apart from supporting them given their state of disability (old age, disabled, widow or unemployed) should also focus on empowering them.

Great article, enjoyed the read... My take is that a pension scheme would play a big part in stimulating economic activity in PNG, especially in rural settings. But are we ready for it?

Funds might be abused, e.g, used up in feeding bad habits like drugs / alcohol like with some Aboriginals of Australia.

I think there is a lot more work to be done up front like you suggested, including a clear demonstration from the PNG government that they are free from corruption so citizens should follow suit with this scheme.

Otherwise, I believe the so called pension scheme or doll is subject to abuse - big time!

Trying to do too many things and not succeeding in any is less effective than doing one thing at a time and getting it right.

I am not convinced of the value of a pension, whereas supporting the informal sector is long overdue.

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