PNG's prospects for sustainable development - making wise decisions: the importance of governance and leadership
15 August 2007; Divine Word University, Madang, PNG
Ms Margaret Thomas, head of AusAID in PNG
Distinguished guests, ladies and gentlemen.
I am honoured to be invited to talk to you today about the importance of governance and leadership in making wise decisions for achieving sustainable development.
There are various definitions of sustainable development whereby objectives to meet current human needs are considered alongside objectives to protect the natural environment - so that human needs can be met not only in the present, but also in the indefinite future.
The White Paper on Australian Aid was released last year and recognises that sustainable economic growth is critical to long-term poverty reduction, and that one of the most fundamental ways in which growth can be sustained is by addressing key environmental challenges in the Asia-Pacific region.
Decision-making in this context requires the integration of economic, social, and environmental objectives, and needs to factor in the uncertain requirements of future generations. Governance is central to this decision-making process and it is central to creating the enabling environment for achieving sustainable development.
Whole-of-government approaches can facilitate the integration of economic, social and environmental objectives at each level of policy development and decision-making. By neglecting consideration of this inter-dependence, sectoral policies may jeopardise other policy objectives.
However, when we discuss governance we are not just discussing the government of the day. Governance is about all the institutions involved in managing a country’s resources and affairs, including political parties, parliament, the judiciary, the media, and civil society. The World Bank defines governance as:
‘……the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.’
And I should note that today I will refer mainly to leadership at senior levels; however, leadership is exercised at many levels other than the political, and I will discuss a role for community leadership later on.
Weak governance and leadership prevents sustainable development for several reasons. In particular, without strong institutions and laws that promote social stability and legal certainty, there is a lack of predictability. This limits investment that serves as the basis for development.
Lack of investment in turn deprives the government of revenue to invest in education, social safety nets and environmental management. Further, deficiencies in laws, leadership or institutions are generally correlated with higher rates of corruption, which again is known to impede development. In particular, lack of effective or unenforceable property rights for natural resource management encourages unsustainable resource harvesting.
Pacific leaders are not silent on this issue. The Pacific Islands Forum Secretariat published the following Eminent Persons’ Group statement in 2004:
‘Variable standards of governance have produced the worst instability, violence, corruption and a breakdown of democratic process. These problems have exacerbated the generally slow pace of economic growth and, in some cases, led to economic decline. Poor governance has a direct impact on the lives of Pacific people.’
The Pacific Islands Forum set the benchmark with its principles of good governance, which it holds as fundamental to good leadership. Agreed in 2003 by heads of government, these principles emphasise respect for democratic processes and respect for the people on whose behalf leaders exercise power, specifically:
• Respect for the law and system of government;
• Respect for cultural values, customs, traditions and religion;
• Respect for people on whose behalf leaders exercise power;
• Economy and efficiency – ensuring that resources are not wasted, abused or used improperly; and
• Respect for office – exercise authority in an open, transparent accountable, participatory and decisive but fair and equitable manner.
Elaborating on these points, good governance requires: participation, rule of law, transparency and accountability, responsiveness, consensus, equity, efficiency and effectiveness, and leadership.
If we look firstly at participation, it is built on freedom of association and speech, as well as capacity to participate by all members of society. A participatory process gives voice to decision-making, either directly or through legitimate institutions that represent people’s interests. This is particularly important in environmental decision-making, where decisions pertaining to natural resource use and management are inclusive of informed rural communities and women whose livelihoods are directly impacted by the outcome of these decisions.
This process is essential for equity, where all affected stakeholders have an opportunity to improve or maintain their well-being.
And participation provides a foundation of transparency and accountability. Transparency is built on the free flow of information whereby the information and institutions involved in decision-making processes are accessible to stakeholders, and enough information is provided to understand and monitor them. Without transparency we cannot evaluate that a process is equitable, sustainable or efficient. Transparency enables stakeholders to hold to account decision-makers in government, the private sector, and civil society organisations.
Good governance mediates differing interests to reach a broad consensus on what is in the best interests of the group over the longer-term. In a diverse country like PNG, capturing and responding to the preferences of stakeholders is a challenge, and I will come back to this point later on when I discuss clientism and fragmentation.
All these qualities of good governance are upheld by an impartial and fair rule of law.
Together these principles of good governance enable the effective and efficient allocation of resources, including natural resources and human capital. Scientific tools have been developed to assist in this process, including: cost-benefit analysis to assess economic benefits and costs of development decisions, tools for social impact assessment, and environmental impact assessment techniques.
But ultimately the decisions to enable sustainable development rest with our leaders. Leadership requires a broad and long-term perspective on good governance and human development, along with an understanding of development resources and the historical, cultural and social complexities in which good governance and human development is based.
Good leadership is critical in ensuring sustainable and responsible development.
Leaders exercise power on behalf of the people. They are the custodians of the resources and interests of the people, and their decisions should reflect this. This is nowhere more important than in decisions affecting the use of natural resources and the sustainability of development: the impact of these decisions is irreversible and will be felt for generations to come.
The majority of Papua New Guineans live in rural areas and are dependent on natural resources for their livelihoods, and this rich natural resource stock in turn forms the economic resource base of this country.
In fact natural resources in PNG account for 61.7% of GDP – the third highest in the Pacific after the Cook Islands and Palau. However, this makes PNG particularly vulnerable to the resource curse: the notion that easily obtainable natural resources may encourage internal political corruption, underinvestment in domestic human capital, and a decline in the competitiveness of other economic sectors, thereby actually hindering growth prospects.
And according to World Bank Institute indicators for 2006, in the Pacific region governance in PNG ranks only above the Solomon Islands.
The combination of these factors paints a challenging picture for PNG prospects for sustainable development. However, development scenarios outlined in the Pacific 2020 report released last year suggest the Pacific region is resilient, with several countries now stable and peaceful.
With rich natural resources and significant aid flows, the Pacific– and PNG - does have prospects for sustainable development. But this will require strong leadership and good governance for wise decision-making.
Pacific 2020 argues that the region’s governance challenges are based on clientism and fragmentation. Clientism refers to the dominance of local issues where prospective politicians are lobbied to promise favours, including of employment and money to members of their electorate or clan group. Fragmentation, on the other hand, refers to a politician focussing on the distribution of benefits, rather than the maximising of benefits in an open and transparent manner, in response to ethnic identity or other cultural divisions. These two challenges reinforce each other, and result in a form of democracy that focuses on local issues rather than broader, multi-dimensional issues, such as sustainable development.
Clearly clientism and fragmentation are issues in PNG. There are also more operative challenges such as the lack of information about social values and preferences for specific development initiates, lack of scientific understanding about system wide impacts of shocks on specific natural resources, and natural variability such as climate change.
These challenges are based in part on inadequate resources to undertake these analyses, but also lack of consultation with affected stakeholders, or misreporting of impacts of development. Poor policy development and lack of implementation may then favour certain interest groups, to the detriment of the environment and the poor.
Logging and fisheries are two examples of sectors affected by clientism and fragmentation. Poor governance in these sectors frequently relates to the integrity of decisions in the granting of licences, and points to the need for greater transparency in decision making, including on decisions about who should and should not be allocated licences, the conditions attached to licences, and decisions on fee levels and pricing.
If we take the forestry sector in PNG as an example, economic and social drivers behind deforestation are manifold. They include clearing land for agricultural purposes, logging, and fuel wood in rural areas. With high population growth, the development pressures on this resource are escalating.
These drivers that undermine sustainable development are complex. Agriculture and logging drive economic growth for the country and provide social benefits for people.
There are other broader challenges to PNG’s sustainable development that require a multilateral response, including climate change and globalisation. With sound governance frameworks and due consideration to social and environmental impacts, the economic benefits of globalisation are enormous in PNG.
International co-operation in addressing these challenges is becoming increasingly important. International companies must consider environmental and social impacts of their operations overseas using the scientific tools I mentioned earlier such as cost benefit analysis, and social and environmental impact assessment. Tomorrow Australia’s High Commissioner to PNG will talk more about how seriously Australia considers this international responsibility in the mining sector.
As a key trade partner and aid donor, Australia can play an important role in enhancing the capacity of PNG to manage resources in a sustainable manner, through capacity-building and technology transfers, as well as supporting policies that provide for the equitable allocation of development benefits for current and future generations.
Australia recently put out a call for partners to join in the Global Initiative on Forests and Climate. The GIFC, as it is known, is looking to bring together both developed and developing countries to reduce greenhouse gas emissions from global deforestation and to sustainably manage the world’s forests by placing an economic value on the ecosystem services forests provide – that is, protection against global warming.
There are a number of benefits of reducing deforestation including preserving bio-diversity and ensuring a more robust eco-system which can better act a buffer against disease, pests, and natural disasters. The principle behind it is that through positive incentives and market-based instruments, sustainable forest management and development can be achieved.
Focused primarily in our region, including PNG, Australia has committed $200 million over five years to encourage countries to reduce deforestation, promote sustainable forest management and encourage the planting of new forests. However, the most important benefit in terms of incentives is that avoided deforestation is one of the best ways to reduce global emissions. Emissions from deforestation in developing countries represent about 20% of annual global greenhouse gas emissions, or about six billion tonnes of carbon dioxide per year.
As the international community comes to terms with the effects of carbon on climate change, other countries and the private sector will also be interested in investing in avoided deforestation as a way to offset their own carbon emissions. PNG, with 65% of forest cover, is well placed to take advantage of this potential market. This was recognised by Sir Michael Somare in his April press release welcoming the initiative.
However, without integrity of the resource caretaker, the asset will rapidly become worthless. This is where we come back to good governance: transparency, accountability, and effective institutions are key to ensuring natural resources are developed sustainably.
To overcome the challenges of clientism and fragmentation we need effective institutions to manage resources and affairs, including political parties, parliament, the judiciary, the media, and civil society.
Public sector organisations have responsibility for implementing laws and maintaining order and stability, providing for the protection and advancement of human rights, and ensuring the sustainable use of resources. They also have a key role in the delivery of education, health and other basic services, and in redistributing income to where the needs of the people are greatest.
Good leaders are responsible for setting the standards of institutional integrity by following codes of conduct that are expected both explicitly and implicitly, and acting at all times with objectivity, integrity and honesty. But there is also a leadership role in sustainable development for the community, including minority groups, to demand inclusion in information collection, interpretation, and decision-making.
In conclusion, wise decision-making for sustainable development is enormously complex:
• Firstly, good decisions will be based on all the relevant facts: basic data will have been collected and analysed, options and implications considered, and interested parties consulted;
• We need a capable public service to implement the decisions of government and to take decisions under delegated administrative authority;
• Decision-making needs to be predictable and accountable: we need effective machinery to ensure that decisions are made within the parameters of law and policy, including oversight by the Parliament and administrative review by the Ombudsman;
• And we need strong leadership, exercised at many levels, to set integrity standards and lead PNG on a sustainable path.
With these pre-requisites in place, the economic, environmental, and social benefits that sustainable development can bring are enormous.
End