THE founder of the Micro, Small, and Medium Enterprises (MSME) Council in Papua New Guinea, James P. Gore, has raised concerns about the economic advice given to successive governments regarding the Dutch Disease effect on the country’s economy due to the extractive sector. Gore’s remarks highlight the misdirection by economic advisors, including Dairi Vele, and call for a reassessment of the policies influenced by these recommendations.
Gore in a statement criticized the reliance of the Somare, O’Neill, and Marape governments on what he described as misguided advice from Dairi Vele and foreign economic advisors.
These advisors suggested that regulatory concessions for resource projects, particularly since the PNG LNG Project, were necessary to avoid Dutch Disease. However, Gore argued that this advice reflects a fundamental misunderstanding of Papua New Guinea’s economic dynamics.
“The notion that these concessions were implemented to avoid the so-called ‘Dutch Disease’ is both ill-informed and misleading,” Gore stated. “This advice demonstrates a fundamental misunderstanding of the unique dynamics of the Papua New Guinean economy.”
Gore pointed out that applying a European economic model to PNG is inappropriate and potentially harmful.
He said that Papua New Guinea’s economic landscape is vastly different from European nations and requires tailored solutions that consider its specific circumstances.
“The reliance of past and present political leaders, including the Somare Government, the O’Neill Government, and the current Marape Government, on advice that fails to consider the nuances of the local economy is concerning,” Gore noted.
“It is imperative that decision-makers in Papua New Guinea consult with local patriotic experts who possess a deep understanding of the country’s economic realities.”
Contrary to the advice given, Gore said that PNG’s economy does not have an export-oriented manufacturing sector that would be adversely affected by a strong Kina value. Instead, PNG’s exports primarily consist of raw or semi-processed commodities, priced in USD and dictated by global market forces rather than domestic conditions.
Excluding the extractive sector, PNG remains a net importer, with a stronger Kina ensuring that imported consumables are less expensive for local consumers.
Addressing potential counterarguments, Gore acknowledged that Vele and his foreign economic advisors might claim that lowering the forex rate would make PNG’s imports competitive in the global market, potentially attracting investment into the manufacturing sector to spur industrialization. However, he argued that downstream processed finished products will not be competitive until PNG addresses its inefficiencies and high-cost structure.
High power costs, high water costs, high port charges, high airfares, and high rental costs all contribute to the issue.
“The inefficiencies and high costs are due to incompetence and corruption. We need to address this before we think about depreciating the Kina value!” Gore asserted.
Gore urged stakeholders to exercise caution when considering economic policies and to base decisions on a thorough understanding of PNG’s unique economic context. “The prosperity of our nation depends on informed and strategic decision-making that prioritizes the interests of all Papua New Guineans,” he stated.
