Curbing Corrpution in Papua New Guinea: What Australia Can do

A lively discussion is underway on the Development Policy Centre‘s DevPolicy Blog about what Australia can do to help control corruption in Papua New Guinea, the largest recipient of Australian foreign assistance.   It follows a government promise that by July 2015 the government will “detail the measures we [Australia] will adopt to protect Australian Government aid funds and how [Australia] will support our partner country’s anti-corruption efforts.”  What’s made the discussion so lively, as Grant Walton and Stephen Howes explain in the initial post, is the juxtaposition of Foreign Minister Julie Bishop’s recent discussion of the government’s plans to implement the policy with PNG Prime Minister Peter O’Neill’s evasion of arrest for his alleged role in a major corruption scandal and his attempts to dismantle PNG’s anti-corruption taskforce.

In a comment I suggested the Australians begin their anticorruption effort by cracking down on corruption in the projects they fund.  As I have written before, while foreign aid donors may have few ways to influence corruption in recipient governments’ own programs, this is not the case with the programs they finance directly.  Australia plans to provide PNG with somewhere around US$ 467 million over the 2014 -2015 fiscal year; it has absolute control over how these funds are disbursed and should use it to see that: 1) regular, unannounced audits both financial and technical of all its programs are conducted; 2) bids on all procurements are screened for signs of collusion; and 3) firms and NGOs implementing their projects institute anti-corruption compliance programs of the kind required by the new U.K. anti-bribery law.  These measures should be complemented by 4) creating a dedicated inspector general or integrity unit to investigate complaints of corruption in projects with those found to have corrupted a project prosecuted either in PNG or Australia.

Commentator Paul Oates liked my recommendations but questioned their utility because it was highly unlikely that PNG would prosecute its nationals for stealing Australian aid money.  He thus suggested other ways Australia could sanction those who corrupt its aid projects.

I would be surprised if Australian law did not provide for the prosecution of PNG nationals in Australian courts for stealing Australian aid; if it does not, I would add a fifth recommendation to those above: amend the Australian criminal code to allow it.  Of the measures Oates suggests instead of prosecution, three should be added to mine — deny those who corrupt an assistance project from: 1) buying Australian assets with the proceeds of corruption (which may already be the case under Australia’s Proceeds of Crime Act) and 2) visiting Australia (the U.S. has refused to issue visas to corrupt foreign officials since 2004), and 3) publicly humiliate them by widely publicizing their wrongdoing.

Grant Walton also replied to my post, saying that while the recommendations were “important first steps . . . . addressing corruption in an aid program doesn’t root out corruption per se.”  It is critical to address the larger issues in PNG, he notes, because thanks to a growing economic boom fueled by the exploitation of its resources. Australian influence over PNG will diminish sharply in the coming years as revenues from resources outstrip aid dollars.  Grant fears that the PNG is about to catch a serious case of the resource curse, enriching elites while leaving the rest of PNG’s citizens no better off than they are now.  “What role,” he asks, “can Australia play to help ensure that this [resource] largesse gets through the government system to benefit the grassroots, rather than being siphoned off by elites?”

My response is twofold:  One, don’t underestimate the spillover effects from rooting corruption out of aid programs.  A vigorous anticorruption program will not only set a salutary example of what can be achieved but will require training and employing hundreds of accountants, auditors, and other corruption prevention and enforcement personnel.  Their skills can later be put to use by the Ombudsman, Auditor General, and other PNG agencies to arrest abuses generated by the resource boom.

Two, be realistic.  The cure for the resource curse lies primarily with PNG citizens and the strength of their governing institutions.  But Australia can certainly help.  Aid dollars should be targeted on strengthening the critical institutions of governance, and if this money is actually spent for the purposes intended, rather than siphoned off into corrupt officials’ pockets (another reason anticorruption controls on aid dollars is critical), it can make an important contribution to institution building.  PNG’s Ombudsman and Auditor General have made enormous strides in recent years thanks in no small part to Australian support and the justice sector SWAP is beginning to pay dividends.

6 thoughts on “Curbing Corrpution in Papua New Guinea: What Australia Can do

  1. In regards to the effective use of PNG’s natural resource revenues, the Australian government could take steps to increase the transparency of natural resource payments that oil, gas and mining companies make to the PNG government. While not a silver bullet to ending corruption, it’s a first and necessary step. Mandatory disclosure laws, for instance, that require listed companies to disclose payments to governments would provide citizens with information necessary for assessing whether deals are fair and governments are managing resource revenues effectively. Legislation to this effect has already been approved in the US, EU, and Norway, and Canada hopes to finalize legislation in 2015. With its sizable mining sector, and many companies operating in PNG, Australia would do PNG (and many other countries, including itself) a service by passing similar regulations.

  2. Rick,
    this is an important article and an issue of regional importance in our neck of the woods. Sam Koim, the Chairman of the PNG Anti-Corruption Task Force Sweep made a speech to AUSTRAC – the Australian Financial Investigation Unit (under our FATF obligations) – in which he pointed out much of the corruptly acquired assets of PNG officials were being invested in Queensland, Australia. Unfortunately, seizure of these assets under Australian Proceeds of Crime Act (POCA) is likely dependent on a request from PNG authorities. These authorities are quite possibly the owners of the assets in question – I would therefore not hold my breath waiting for POCA.

    The suggestions you have made would be a good step toward resolving an otherwise wicked problem – amendment of the POCA, or self-initiated action by Australian authorities would be a better follow-up.

    For Koim’s speech see: http://www.abc.net.au/4corners/documents/PNG2013/Speech_SamKoim.pdf

  3. Appreciate the insights here. Rick, I do like the steps you outlined and think it could be the first concrete step forward. Yes corruption is a big issue and as Grant pointed out, a holistic approach is needed from Australia but first, Australia must work on what it can really control/have the upper hand and that is the aid money and how it is used. Investing a good number of years cracking down on its trail and who is responsible for its misuse will, among other things, create expertise and assist in drafting a more elaborate approach.

    In the wake of the resource boom, corruption is undoubtedly here to stay. Australia need not plan grand strategic or articulate superficial approaches it cannot fully manage. Instead, it must work on small tangible strategies where it can control and effectively enforce if necessary.

    That said, Grant reminds us that one should be doubtful as to the extent of seriousness on the part of Australia given its current interests in the country. Australia must be prepared to make some sacrifices if the anti-corruption in PNG is to progress any further. But is Australia prepared for that?

  4. Appreciate the insights here. Rick, I do like the steps you outlined and think it could be the first concrete step forward. Yes corruption is a big issue and as Grant pointed out, a holistic approach is needed from Australia but first, Australia must work on what it can really control/have the upper hand and that is the aid money and how it is used. Investing a good number of years cracking down on its trail and who is responsible for its misuse will, among other things, create expertise and assist in drafting a more elaborate approach.

    In the wake of the resource boom, corruption is undoubtedly here to stay. Australia need not plan grand strategy or articulate superficial approaches it cannot fully manage. Instead, it must work on small tangible strategies where it can control and effectively enforce if necessary.

    That said, Grant reminds us that one should be doubtful as to the extent of seriousness on the part of Australia given its current interests in the country. Australia must be prepared to make some sacrifices if the anti-corruption movement in PNG is to progress any further. But is Australia prepared for that?

  5. Rick, A very serious, traditional sanction in PNG is shame. While it could be said that political leaders might be slightly revered for being ‘canny’ and ‘making good’ albeit at the voters expense many voters can’t see that part of the equation. Public shaming is a very powerful force that could provide some transparency in today’s PNG.

    Another powerful force is envy. If those who are corrupt see themselves being done out of a ‘good deal’ by an individual, they may well turn on him/her and report them if they knew of where they could get some effective results.

    Public shaming and public advertising of any wrongdoing will have a significant effect on slowing down corruption. Transparency International unfortunately doesn’t have the resources to carry through on these ideas however having a guaranteed segment of any aid project devoted to potentially highlighting any corruption involved with the project’s completion could well help in this endeavor.

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