Citation: Sharon Beder, 'Privatisation in PNG', Engineers Australia, September 2001, p. 30.

This is a final version submitted for publication. Minor editorial changes may have subsequently been made.

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The Australian government has played an active role in pushing for privatisation in Papua New Guinea despite its unpopularity amongst PNG citizens. In June three students were killed in PNG when they protested against the privatisation of government enterprises.

A third of the PNG population lives in poverty despite the country's rich natural resources. It owes over $1800 million and spends about 40% of its annual budget ($400 million) servicing that debt. The IMF and the World Bank require the PNG government to cut other government spending and to sell off public enterprises so that it will have enough money to service the debt.

In 2000 Prime Minister Sir Mekere Morauta agreed to public sector reform and privatisation of state enterprises in return for a promised $US200 million in additional loans from the World Bank. The promised funds were recently withheld because of delays in the privatisation schedule.

This program of public sector reform and privatisation is reinforced by the Australian government. As part of its aid program for PNG, which amounts to about $300 million each year, AusAID has a governance program which includes promoting private sector reform and privatisation.

Privatisation in PNG offers many opportunities for Australian investors and consultants. In September 2000 a major summit was held in Sydney to outline these opportunities to fund managers, analysts, stockbrokers, government officials, potential investors and consultants, including engineering consultants. According to the Sydney Morning Herald, all the privatisation project managers in PNG are Australian.

However public sector reform and privatisation are not popular in PNG. Just over four million people live in PNG. Only about 15% of the 50,000 young people leaving school each year are able to find "formal sector employment". The reforms will mean job losses. The World Bank loan includes money to pay for retrenchment packages for 7000 public servants, one quarter of the public service.

Opponents argue that services will suffer following privatisation because many remote services are not profitable. They claim that prices will go up as foreign companies seek to make greater profits in the absence of competition and safety will suffer.

In 1999 the PNG government retrenched all 96 engineers from Air Niugini in preparation for privatisation. Some of the engineers had been protesting because a promised pay increase had not been paid. The engineers claim they were sacked because Air Niugini was trying to cut costs by reducing staff numbers and forcing remaining staff to accept individual contracts with reduced working conditions.

The Aircraft Engineering Association (AEA) claimed that the sackings had compromised safety. However PNG's Corporatisation and Privatisation Minister Vincent Auali said he was confident the airline could operate safely with the fewer engineers who had been hired to replace the original engineering department. In 2000 a national court ordered that the sacked engineers be reinstated.

The people in PNG are well aware of the role of Australia in applying pressure on its own government. In April several hundred soldiers mutinied in protest against an Australian-sponsored Commonwealth Eminent Persons Group (EPG) recommendation that the PNG armed forces be reduced from 4,150 to 1,900. They demanded that the EPG recommendations be rejected and that World Bank and IMF officials be expelled from PNG as well as Australian diplomats and military advisers. The soldiers argued that Australian influences had "denuded the nation's vast resources under the guise of assistance."

In June thousands of students rallied at Parliament House in protest against the planned privatisation of government services including Telikom, Elcom and Post PNG. Their main concern was that this would result in the foreign ownership of 70% of once-public assets. When riot police attempted to end the peaceful protest with tear gas, shotgun and M-16 rifle fire, three students were killed and many injured causing widespread rioting.

The Australian government did not condemn the police action but instead offered the PNG government support in dealing with the unrest. Foreign Minister Alexander Downer expressed concern that PNG might give in to the protests and abandon the program of "economic reform" and indicated that Australia might withdraw aid if the Morauta’s government was toppled.

The question that remains is whether Australian-sponsored programs of privatisation are in the long-term interests of ordinary people in PNG?