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by Rowan Callick, Australian Financial Review 8th June 2002

A spectrum of the global good and famous showed up for the birthday of East Timor three weeks back. But the most useful guest may prove to have been the representative from near-neighbour Papua New Guinea, veteran politician John Kaputin.

His prime gift from the Government led by Mekere Morauta was the invitation to send a technical mission to learn from PNG's experience.

Timor, one of the 20 poorest countries in the world, can indeed learn a lot from the continuing travails of PNG, which is about to hold its sixth election since independence.

The first lesson is not to depend on resource income. Klaus Rohland, the World Bank's director for East Timor, was properly upbeat at a donors' meeting on the eve of independence, saying the new country "has a good chance of being economically independent in a few years with revenue from offshore".

Rohland is also country director for PNG and he is well aware that PNG also has depended heavily on its immense resource wealth to underpin improved living standards. Instead, many of the country's social and economic indicators have been falling over the past 15 years.

Morauta has stabilised, with heroic effort, the Government's own economic performance, but he now needs a full term in office to capitalise on this to turnaround the broader economy. The Asian Development Bank's latest forecast has PNG continuing in recession/depression through a fourth consecutive year in 2003.

The new Australian Strategic Policy Institute said in its report on Timor that the benefits of the country's oil and gas revenue "will depend critically on how it is spent. If it is used to fund infrastructure that will encourage private investment, the benefits will endure. If not, it will be wasted".

To see just how "wasted" such income can get, Kaputin and Morauta might take their Timor guests up to the Southern Highlands, the Texas of PNG, which has received more than $100 million from oil revenues alone over the last decade.

Economist Mike Manning, director of PNG's only privately funded think tank, the Institute of National Affairs, wrote recently: "For years, the INA has been saying that PNG is not the basket case that outside observers say it is. It has looked on the bright side and it has always seen the great potential that PNG has.

"But the Southern Highlands is an example of how these resources have been wasted and dissipated for the advantage of a few people and the disadvantage of the vast majority".

For the latter not only have the new revenues not helped them; the money, converted into weapons, has positively harmed them.

The Australian Associated Press reporter in PNG, Jim Baynes, has described the resulting mayhem as "Mad Max PNG-style: tribal warriors armed with M-16s skirmishing with their rivals from the backs of armour-plated utes."

Manning says Mendi hospital is closed, there are no doctors at the district hospitals at Tari and Ialibu, and only one in Mendi, the provincial capital. Mendi High School is closed, roads in Mendi town are almost impassable, and those outside it are also in "a terrible state of disrepair".

He says: "There have been no significant new development projects in the province apart from a seven-storey building in Mendi town, which seems to be largely unoccupied. The agriculture and commerce divisions [of the provincial government] have not funded any new initiatives from the Southern Highlands budget for more than five years."

About 140 of the teachers on the payroll are not teaching because no operational funds have been received. Failure to fund vehicles for health workers means that the immunisation rate for small children has more than halved, from above 80 per cent to below 40 per cent.

Technical positions are filled by political appointees. At one stage five people were being paid for the provincial administrator's job at the same time and none was doing the work.

Five years after independence, in 1980, production of coffee, tea, cattle, vegetables and even sheep was thriving in the Southern Highlands, employing large numbers of workers. All have gone backwards since then.

Corruption is at the heart of PNG's malaise, and Timor needs to take every possible step to prevent it taking root there too. Adopting as its language Portuguese, spoken only by the elite, is hardly a promising start.

Critics have said of PNG that at least it has maintained its democratic structures. And so it has. But signs are emerging that the extraordinary expectations of PNG voters are at last diminishing, and that this election may see less mass engagement, and less drama, than for decades. Except maybe in resource-rich Southern Highlands where, to repeat the phrase applied by Solomon Islands community activist John Roughan to the desperate scene, "politics has become the economy".

East Timor, beware.

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