Piers Akerman: PNG waste stretches neighbourly concern
PIERS AKERMAN, The Sunday Telegraph
GLOBE-trotting fashionista Foreign Minister Julie Bishop needs to explain why Australian taxpayers are bankrolling Papua New Guinea’s vanity projects when that nation is economically febrile — if it has not already fallen into the pit — and our own economy is wallowing.
Numerous companies doing business with the PNG government have not been paid monies owed, the government itself has not met bills for its own instrumentalities, and we are picking up the cheque.
Last week both the PNG Parliament House and the Governor-General’s residency had their electricity cut off because of more than $320,000 in unpaid bills.
A former prime minister, Sir Mekere Morauta, who retired five years ago, said he may re-enter politics at the election due in July-August to fight what he says is “the growing web of corruption, abuse, and poverty the country is trapped in” and deal with growing levels of public debt — more than 33.5 per cent of GDP, on conservative IMF figures.
He detailed a growing list of other concerns, including the mortgaging of future income to debt repayment, depriving basic services such as health and education of proper funding, the recession in the non-mining sector, with people losing jobs daily and businesses cutting expenditure to the bone, and poor job prospects for school leavers.
He said the government is not paying businesses for services provided, which in turn leaves companies struggling to pay their own bills and staff, the value of the kina is declining and prices rising and that there is nothing to show from LNG, oil, gas, gold and copper wealth, apart from glamour projects in Port Moresby.
“Where is all the money, people wonder,” he said.
Sir Mekere said there had been severe budget cuts to health and education, that teachers, doctors, health workers and policemen were not being paid properly or on time and that universities — UPNG, Unitech, Goroka and Vudal — were being starved of resources, yet the government is building a new one in Ialibu, where only the principal building contractors will benefit.
He said there had been a breakdown of the machinery and system of government, and a weakening, destruction and politicisation of institutions of state.
He accused Prime Minister Peter O’Neill’s government of dictatorship-type rule which threatened democratic principles and practice, with the PNG parliament being used as a rubber stamp and said there was a lack of respect for the rule of law with heavy interference in law and justice agencies, threats to media personnel and suppression of media freedom and a crushing of dissent and violent treatment of student protesters.
“People see no sign of the root problems being addressed. People are afraid that the situation will get worse if the roots are allowed to rot further.
“People are telling me that they want a new government after the election, with a new leader,” he said.
“I chose to retire from politics five years ago. I am enjoying my retirement.
“I am enjoying spending time with family and friends, boating, fishing, reading, travelling, maintaining a continuing oversight of PNGSDP (Papua New Guinea Sustainable Development Program) and contributing to society in other ways.
“But I feel the concern of people. I hear what they are saying. I share their fears.
“More and more I find it difficult to ignore the growing chorus everywhere I go — in markets, shops, offices, restaurants, from academics, business leaders, public servants, professionals, market sellers, policemen, former MPs, current MPs, intending candidates, men and women I pass in the street,” he said.
Australians should care, too, because despite PNG’s frequent claims of economic and political independence it is always begging for more Australian aid.
Most recently, Australia pledged an extra $100 million to underwrite a continuing Australian Federal Police presence in PNG during next year’s Port Moresby-based APEC conference.
Last week New Zealand Foreign Minister Murray McCully, the man who gave NZ’s backing to last year’s anti-Israeli resolution at the UN in December, pledged his country’s support to PNG for next year’s APEC summit.
Both Australia and New Zealand would claim that they are providing support to PNG to head off the massive inroads China is making into the economy of our nearest neighbour but neither government seems interested in addressing the problem of corruption.
Earlier this month two senior ministers were suspended after they were accused of benefiting from the purchase of land by a government corporation. The land, 10km from the sea, was bought for a naval base.
Both the Minister for State Enterprise William Duma and the Defence Minister Fabian Pok are being investigated by the police and the Ombudsman Commission.
Duma is the minister responsible for the government corporation which purchased the land but is alleged to also own or have a proxy interest in a parcel of land owned by the corporation.
Pok is accused of appointing his brother-in-law as the Secretary of Defence and of being inappropriately involved in directing the department to purchase the land. Both men deny the allegations.
Corruption claims in PNG are nothing new but Australian and New Zealand companies are complaining that their bills aren’t being paid while their respective governments are handing even more money to PNG.
As the number of PNG ministers investing in homes in Australia continues to grow, an investigation by Australia into the manner in which grant money is being spent is long overdue.
The photo above and the story at the bottom of this article rather sum up Australia’s relationship with PNG. Basically, Australia couldn’t give two hoots about corruption in PNG as long as some of the money keeps flowing into the Queensland property market, Australian companies get big contracts from the PNG government and cheap access to PNG resources, and, of course, the gulag on Manus stays open.
What PNG desperately needs is international friends who insist on upholding the highest standards of integrity and good governance, not countries like Australia, interested in only what they can bleed from our own suffering…
This is what the Finance Commission of Inquiry had to say about the co-chair of Australia’s Strategic Management Committee overseeing the new PNG Governance Facility, Isaac Lupari, and his K3.7 million fraud:
‘Mr. Isaac Lupari sued the State for breach of four separate contracts that were entered into as Secretary for the Departments of Finance, Defence, DPM and Transport in that order. He claimed that he had been unlawfully terminated from all those positions after serving short stints in each and claimed the balance of all pay and entitlements for the unexpired period of all four contracts’.
The Commission observes:
‘It will be clear from the evidence gathered so far that Mr. Lupari never suffered any loss of pay and entitlements, and was adequately remunerated by the State for the whole time that he claimed for and beyond’.
In summary the Commission of Inquiry found:
- In 1997 Lupari was appointed Finance Secretary by Prime Minister Bill Skate, the mentor to our current PM, Mr O’Neill.
- On 15 January 1998 he was sacked by the Skate government, but as fortune has it, the very same day he got the job of Defense Secretary.
- On 17 March 2000 he was made Secretary for the Department of Personnel Management by the Morauta government, with a contracted end date of 29th of June 2000.
- On the day his contract ended, Lupari was made Transport Secretary.
- Nevertheless, Lupari claimed he was unlawfully dismissed as Secretary for the Department of Personnel Management.
- His legal team was … Paul Paraka lawyers.
- The Attorney General and Solicitor General settled the claim for a cool K1 million, which was paid by the Department of Finance on the 17 September 2004 by cheque No. 790468.
- A further K2.7 million in settlements were agreed with Lupari, after he claimed he was also dismissed as Transport, Finance and Defense Secretary– the Commission was unable to find evidence of whether this money was paid.
The Commission concluded:
‘Mr. Isaac Lupari knew full well that his claims amounted to triple and quadruple dipping. Yet he went ahead and instructed his lawyers to file claims against the State in the National Court’.
‘Mr. Lupari was not entitled to the K3,703,461.31, either legally or morally. Paul Paraka lawyers engaged in deceptive conduct when filing Writs in the order they did’.
Read the Commission report on Issac Lupari (220KB)
Strengthening the PNG-Australia Governance Partnership
CHIEF Secretary to Government Isaac Lupari and Australian High Commissioner, Bruce Davis, welcomed a new chapter in the PNG-Australia Governance Partnership.
They chaired the first Strategic Management Committee meeting to oversee the new Papua New Guinea Governance Facility (PGF).
The PGF will help consolidate and deliver our governance and economic cooperation around shared priorities.
“This reflects the close working partnership between our Governments. Through the Strategic Management Committee, senior officials from both the Australian Government and Government of Papua New Guinea, including Chief Secretary Isaac Lupari CBE, will provide oversight of the economic and governance partnership to ensure it is aligned effectively to Papua New Guinea’s priorities,” said Australian High Commissioner Bruce Davis.
Australia is committed to working in partnership with Papua New Guinea as Papua New Guinea progresses PNG Vision 2050.
Papua New Guinea’s Minister for APEC, Sports and Special Events, Justin Tkatchenko, is planning to build for himself a lavish multi-million dollar mini-estate on 8.5 acres of land in the rural Brisbane suburb of Brookfield.
The estate will comprise an ornate main dwelling (shown above) with feature spiral staircase and cupola roof, a three bed-room second dwelling, large gym, animal stables, an ornamental lake with two fountains, a large bird aviary complex, 25 metre swimming pool, two pavilions, garages, sheds, large greenhouse and other outbuildings.
All this on a piece of land Tkatchenko purchased for a cool $1.77 million in November 2015, as revealed on PNG Blogs .
Tkatchenko already owns another home in Brisbane, in the exclusive inner city suburb of Fig Tree Pocket, purchased in 2011 for $1.1 million.
Minister Tkatchenko has a long history of unanswered fraud allegations and has been exposed for lying to Parliament over contracts awarded to his family business; the same business, Kitoro No.33, that is now involved in the development of 15 Upper Brookfield Road.
It was late at night, and the Australian media pack were tired after a long day of following Prime Minister Peter O’Neill.
One sleepy reporter asked O’Neil a delicate question.
‘It’s been alleged by one of your former colleagues – so that’s Sam Koim – that Australia is the Cayman Islands of the Pacific in the way that it provides unlimited opportunities for corrupt officials to invest here. The ABS – Australian Bureau of Statistics – says Australia has received $5 billion in investment in five years from PNG nationals, a lot of which I gather goes into the Cairns property market. Are you pressing this in your visit here to Australia? And if so, what measures would you like the Australian Government to take?’
Peter O’Neill responded to his sleepy colleague, offering to tell a bedtime story on corruption in PNG. It was a more fanciful tale then they had ever been told before. It went like this:
‘On the issue about Papua New Guinean funds being invested in Australia, let me put it on the record very clearly that there are many successful Papua New Guineans who, in their own right, are able to afford to invest in Australia and of course in the property market in Cairns and elsewhere. There is no doubt that the transfer of funds between the two countries have got vigorous scrutiny. If you wish to even pay bills for you schools, kids who are going to Australia, you have to go through the financial regulations bodies which clear those funds to come.
So when you talk about corrupt funds coming to Australia there must be substantive evidence. Unfortunately, everybody jumps on the bandwagon of emotional statements without facts to support it. Now, there is no doubt the Australian Government has got access to the records about who owns properties in Australia and how it was applied, and there’s nothing stopping the Australian Government, there is no requests from the Papua New Guinea Government into whether they should investigate further on how some of these properties were acquired. So we encourage Australian Government to do so.
In Papua New Guinea, of course, it’s an easy issue about corruption and politics. But when you look at the history of the country, since 1964 when self government was introduced in Papua New Guinea to date, do a survey of the politicians who are in office and who have left office and find out how many of them are well off because of corrupt funds that they’ve acquired. Over 90 per cent of them today who have either left office or in office are struggling to even pay their own bills. So this notion that there is great wealth being acquired by Papua New Guinean politicians is ridiculous.
We are doing all we can in Papua New Guinea now to introduce legislations like ICAC, which will be of the final reading in this March session, and we will receive overwhelming support from Parliament where the sorts of funds received by individuals in their wealth will be a subject of investigation, and of course they will be held accountable for them. They have to explain whether they had a rich grandmother who passed on a lot of wealth to them. So those are legislations that we are now putting in place to address this issue.
Even today, when you put more than 10,000 kina, transferring it out of Papua New Guinea, you must declare them to the financial intelligence unit who will give the necessary approval for you to do so. It must the banks are working very closely, all the big banks who work in Papua New Guinea like Westpac, ANZ, BSP, all enforcing these regulations and rules to the strictest terms possible. So there is no uncertainty in that.’
By the time O’Neill had finished his tall tale, the press core was fast asleep.
Download the full transcript of Peter O’Neill speaking at the Press Club
Introductory Statement to the Senate Committee on Foreign Affairs, Defence and Trade
Kristian Lasslett | International State Crime Initiative
The concern that my colleagues and I have with respect to Australia’s aid policy in Papua New Guinea, is that it is strongly driven by ideology and lacks a firm grounding in the empirical reality of PNG. In short, Australia’s current strategy appears to accept that aid should be directed towards creating policies and infrastructure that would make PNG a more attractive environment for business, which in turn will create the levels of growth and income essential to the country’s human development goals. However, this aspiration needs to be tempered with a much greater acknowledgement of the market distorting factors currently operating in Papua New Guinea, which the private sector is deeply enmeshed within, rather than a remedy to.
The reality is regardless of the sector you want to name, many businesses have no intention on providing goods and services at a price that would be dictated by a healthy functioning market economy. Rather, businesses are supplying goods and services in order to charge exorbitant prices that in effect defraud the Papua New Guinea government and Papua New Guinea citizens of their finite revenues. These contracts, projects, services and goods frequently contravene the Public Finance (Management) Act, the Criminal Code, the Land Act, the Investment Promotion Authority Act and various other laws, with impunity.
For example, we have seen numerous Commissions of Inquiry launched in Papua New Guinea, led by esteemed members of the judiciary, which have reached damning conclusions about the cultures of corruption currently pervading the private and public sector.
Most recently, the Commission of Inquiry into Special Agricultural and Business Leases concluded, and I quote:
‘With corrupt government officials from implementing agencies riding shotgun for them, opportunistic loggers masquerading as agro-forestry developers are prowling our countryside, scoping opportunities to take advantage of gullible landowners and desperate for cash clan leaders’.
Of similar concern, a Commission of Inquiry into the Department of Finance found that the legal industry in Papua New Guinea was working hand in glove with state officials to settle out of court vexatious claims, for many of millions of dollars, with the proceeds being shared among the criminal conspirators.
And before that inquiry, we had the well-known Commission of Inquiry into the National Provident Fund, which in this case uncovered criminal conspiracies to defraud workers of their superannuation. Corporate managers, private sector consultants and government officials were all involved, a number of whom have been found guilty of misappropriation under the Criminal Code and sentenced to prison.
If we turn our attention to the often judicious reporting provided by the Public Accounts Committee and Auditor General’s Office we find similarly damning conclusions. For example, following an inquiry into the Department of Lands and Physical Planning, the Public Accounts Committee concluded in 2007, and I quote again:
‘The Department of Lands and Physical Planning has become an arm of private enterprise [who is] responsible for allocating Leases regardless of the Law and to the very considerable cost of the State and the citizens of Papua New Guinea’.
So it might be said, in contrast to the thrust of Australia’s aid policy, Papua New Guinea does not suffer from a lack of private sector involvement, it suffers from a surplus of private sector involvement, which has led to a breakdown of functioning markets, massive price distortion, misallocation of resources, misappropriation on a grand scale and grave human rights abuses, particularly in the extractive industries. And I should emphasise here, Australian businesses are heavily involved in the graft and abuse.
So at present Australia’s aid policy places the cart before the horse. Serious attention needs to be devoted to the delivery of aid in ways that can build capacity and environments that rid both the private and public sector of these pervasive cultures of corruption and lawlessness, that lead to misappropriation, price distortion and human rights abuse. This will require a significant investment in civil society, a sector which can legitimately claim to be desperately underfunded and weak. It is our experience that a strong civil society helps keep the public and private sector to account, in a way that can support both human development goals and markets that are more responsive to consumer needs and human rights.
This agenda will demand significant aid investment in education and capacity building at all levels, it will also require the development of new and meaningful connections with different elements of civil society, ranging from NGOs through to higher education institutions and the media. And of course, there is a deep reservoir of experience within the Auditor General’s Office, the Public Accounts Committee and the Ombudsman Commission that could be drawn on. All in all, it will require an extensive process of consultation, which is sensitive to the genuine efforts being made within the PNG government to address these issues.
In our submission to the committee, the International State Crime Initiative has attempted to the sketch some ideas for constructive paths forward that can create the type of context and environment which will ensure future investment and private sector involvement aids human development, good governance and human rights objectives, rather than hinders them. And I should emphasise these suggestions and reflections are built off over a decade of trenchant research into the criminal forms of misappropriation and human rights abuses, which I noted earlier. Thank you.
Download the International State Crime Initiative’s full submission to the Senate Committee:
Addressing development by challenging impunity: The social impact of state
and corporate crime on Papua New Guinea – Sub 27_ISCI (400kb)
Australian investors, business community and government ignore illegal logging, human rights abuses and corruption in their pursuit of profits
Papua New Guinea’s worst human rights abuser and forest destroyer is being welcomed into the Australian business community with the listing of Kina Securities on the Australian Stock Exchange (see story below).
Kina Securities is wholly owned and controlled by Rimbunan Hijau, the Malaysian logging company with a long history of illegal logging, forest destruction and human rights abuse in PNG.
But none of this seems to worry the Australian business community or the Australian government who simply view Kina Securities as another good opportunity to make a profit out of PNG.
Australia’s actions in welcoming Kina Securities into the heart of its business environment exposes how paper thin are its supposed commitments to good governance, fighting corruption and corporate social responsibility.
Just last year Rimbuan Hijau was exposed in a multi-agency report as employing police officers to brutalize local communities in logging areas.
The 2013 Commission of Inquiry into Special Agriculture Business Leases revealed Rimbunan Hijau’s role at the centre of a huge corrupt and illegal land grab:
With corrupt government officials from implementing agencies riding shotgun for them, opportunistic loggers masquerading as agro-forestry developers are prowling our countryside, scoping opportunities to take advantage of gullible landowners and desperate for cash clan leaders… Our investigations reveal that over 50% of the so-called developers’ currently holding subleases on SABLs are connected in one way or another to Rimbunan Hijau (RH) Limited, which by far is the biggest logging operator in PNG’.
The inquiry concluded more than 90% of the leases investigated were unlawful and should be revoked. But RH has not relinquished any of its stolen ground.
Rimbunan Hijau has a long history of abuse in PNG.
A 2004 report, The Untouchables – Rimbunan Hijau’s world of forest crime and political patronage, exposed RH as one of the world’s largest forest destroyers; its operations characterised by documented illegalities and environmental destruction and protected by an extensive and well-established network of political patronage and media control.
The SBS television company in Australia has also exposed Rimbunan Hijau’s human rights abuses. This is the video testimony of one police officer who was employed by RH:
“We handled those suspects good and proper. We bashed them up, we hit them with huge irons and when we mobilised in there we made sure that these people who complain against rights of their benefit were manhandled, you know. I became violent because of their [Rimbunan Hijau’s] actions, because of their instructions”.
For a more complete dossier of Rimbunan Hijau human rights abuses check out this review.
Rimbunan Hijau is the largest logging company operating in PNG where at least 70% of logging operations are illegal – as revealed in a 2014 report from the prestigious Chatham House group in London. That is a figure confirmed by the World Bank.
Kina Securities to list on ASX and Port Moresby Exchange
Rose Powell | Sydney Morning Herald
Kina Securities will become one of the first dual-listed Papua New Guinea-Australian companies when begins its float on Thursday morning.
The Port Moresby-based company manages a range of financial products and has a market-leading position in the micro-lending space and superannuation. It is the largest licensed funds manager in the country with more than $2.3 billion under management.
However, the stock sparked conversation among Australian investors due to its relatively cheap starting price as well as its dependence on the Papua New Guinean economy and currency.
The 30 year old company is seeking to raise $97 million from its IPO, with shares starting at $1. It has a 7.5 price-to-earnings ratio and its prospectus says it is aiming for an annualised 9.7 per cent dividend yield. It will have a market cap of $164 million.
Despite the risks, the IPO is oversubscribed. One investor, Bill Laister from Contango Asset Management, is optimistic about the company and its unusual exposure to the burgeoning middle class of Australia’s rapidly growing neighbouring economies.
“We participated in the float because we liked the company, its valuation and the share price. It’s very cheap, which compensates for increased risks, and the price and valuation will support the stock going forward,” Mr Laister said.
Australian investors can gain exposure to Papua New Guinea through two of Australia largest banks, Westpac and ANZ, but Mr Laister said Kina’s potential lay in its access to wider range of financial products and profits.
“This is the first listed opportunity to get exposure to banks involved at the micro-lending level, which we think has real potential,” Mr Laister said.
The majority of Kina Securities’s operating revenue comes from lending operations. Another quarter comes from foreign exchange and remittance activities and another quarter from deposits and funding.
A significant proportion of the funds raised from the IPO, just under $77 million, will go towards the acquisition of another Papua New Guinea financial company the Maybank Group and covering the costs of listing.
Another $22 million will go to the company’s largest shareholder, Hong Kong based investment company Fu Shan, in a partial sell-down.
Kina Securities, which is chaired by former Papua New Guinea prime minister Sir Rabbie Namaliu, will appoint former Suncorp chief executive David Foster to its board.
The float is underwritten by Morgan Corporate. It will list on both the ASX and the Port Moresby exchange on Thursday morning.
Money laundering on Australia’s watch
“Australia is becoming the choice destination for dirty politicians in the region to park their funds.”
Two reports by The Age investigative team last week showed how corrupt foreign officials are laundering money in Australia. The stories cut uncomfortably close to the prime ministers of Malaysia and Papua New Guinea, generating outrage in both countries.
On Tuesday, we reported that Malaysian officials had used Australian real estate transactions to steal money from their citizens. They used a Malaysian government agency to buy a student accommodation block at Monash University, at an inflated price, and arranged for a $4.75 million kickback to be sent offshore.
On Wednesday, The Age and SBS presented undercover video footage that showed lawyers explaining how to bribe politicians in PNG and send tainted money to Australia.
The prime ministers of Malaysia and PNG, Najib Abdul Razak and Peter O’Neill, both sought to distance themselves from the players involved and announced wide-ranging investigations into their own governments. They were forced into action not because the behaviour uncovered by The Age was unexpected, but because it had been so clearly exposed in the Australian media and disseminated online.
The scourge of corruption is an old problem in both Malaysia and PNG, and their citizens are running out of patience. Some of the implications for Australia, however, are new. This stable, open and law-abiding nation has never had to think of itself as a place for corrupt leaders in the region to wash their dirty money. This week’s reports show how complacent we have become. Foreign officials are targeting weaknesses in the integrity of our systems.
Why did corrupt Malaysian officials choose something so brazen as an apartment block in Caulfield? The answer, in part, is that real estate is exempted from Australia’s otherwise-onerous anti-money laundering legislation. “Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate,” the agency responsible for tracking questionable money flows, AUSTRAC, says in a recent report, Money laundering through real estate. Why do corrupt PNG officials hire lawyers to do their dirty work? Because, in part, they too have been exempted from Australia’s money-laundering regime. “Legal practitioners provide a veneer of legitimacy,” says a second AUSTRAC report, which details how lawyers can abuse their “gate-keeping” and “facilitating” roles to conceal all manner of dodgy dealings.
Professionals in both industries see the legislative loopholes as business opportunities, as the PNG video footage makes abundantly clear. “The days of banging a million bucks into this secret numbered account in Singapore are over,” says one of the lawyers, Greg Sheppard, explaining how clients should conceal bribes in commercial contracts drafted by lawyers. Sheppard’s law firm partner, Harvey Maladina, was even more explicit. He suggested that clients could conceal corrupt money in inflated invoices issued by a well-known Queen’s counsel.
These revelations should help to shake this country from a deep complacency. Our reports point to substantial legislative gaps that need to be closed. Regulators need to wake up. The Age‘s investigative team has exposed all this is only after several Australian enforcement agencies chronically and systematically failed to fulfil their roles.
Australia has always relied on foreign capital and probably always will. What is new, and highlighted in these stories, is that much of it now comes from developing countries in our region where corruption is rife and rule of law is weak. People seeking to launder money have worked out that there are major weaknesses in Australia’s integrity and oversight systems.
How much does this failure matter? Just ask Papua New Guinea’s renowned corruption investigator, Sam Koim, who has been endeavouring to extract PNG public money from Queensland casinos and real estate – without success – for many years. As Koim told The Age: “Australia is becoming the choice destination for dirty politicians in the region to park their funds.” Australian authorities need to listen, and act.