Australia has a unque opportunity to help Papua New Guinea reverse declining living standards

Of the 30 or more contributions I have written for On Line Opinion this year I regard this as the most "consequential" when it comes to the future growth and stability of our closest neighbour, Papua New Guinea, and the special relationship with PNG that is so vital to the Australian National Strategic Interest.

In no way do I diminish the importance of my many suggestions as to how to try and minimise the Peoples' Republic of China influence across key sectors of Papua New Guinea, or my contributions on the need to strengthen democracy, the role of the churches, or address the appalling state of the health sector.

But I believe the greatest challenge now is to look seriously and constructively at how the real decline in the living standards of, and opportunities for, the majority of the eight plus million men, women and children of Papua New Guinea, can be reversed with a pro-active Australian approach.

On any number of occasions I have suggested that we must go "big and bold" when it comes to not just address the PRC challenge in PNG and the South Pacific, but also how we can substantially enhance our standing among our closest neighbours, and especially our former colony, Papua New Guinea.

That is why I was last week so critical of the Australia Infrastructure Financing for the Pacific (AIFFP) scheme introduced by the federal government late in 2018. It is just not big, or bold! And the way it is structured it never can be.

One of the flaws in our policy approach to Papua New Guinea in particular is the belief that funding "infrastructure" counters the PRC influence and strengthens ours.

The way the PRC has structured its infrastructure financing arrangements under the Belt and Road program – loans, not grants, and loans tied totally to work being undertaken by PRC contractors – makes it very difficult for Australia, or the United States, or Japan, to match the program. We can offer millions via a mix of grants and loans – China can offer billion via loans alone.

I believe as strongly as ever that we must urgently restructure our existing $600 million a year "development assistance" program to focus on the upgrading of vital health services principally via the Angau Hospital in Lae, a focus on improving basic services on the island of Daru, the closest PNG community to Australia, and assisting with the vital 2022 PNG National Elections.

But our number one priority in Papua New Guinea must focus on the eight million men, women and children who today are really being adversely impacted by wholly inadequate basic health services, troubles in the schools and tertiary education sectors, AND the really run down state of the agricultural sector – especially agriculture for export.

Of these areas the one I believe we now have a unique opportunity to really make an impact in is the agricultural export sector. When I first went to work in PNG in 1978, agricultural production and exports were the backbone of the economy, providing about fifty per cent of export income. Today it is barely half that.

While the mining, oil and gas sectors have grown significantly, agriculture has gone backwards, and it has gone backwards in an alarming way.

Without covering all the agricultural export sectors, the one that directly impacts on most people, coffee, and the one which has achieved greatest recent success, palm oil, illustrate just how dire the position is and the impact that is having on REAL living standards.

The coffee industry used to be the backbone of much of the economy. Twenty five years ago annual production was around 1.2 million bags a year. This year it will struggle to reach 700,000 bags. In the same period the population of PNG has grown by around 75 per cent….especially in the Highlands where most of the coffee is grown.

The most recent agricultural industry to really grow in Papua New Guinea is palm oil. In 2019 production was around 640,000 tonnes, but in 2020 it fell to 540,000 tonnes.

In a nation where upwards of 80 per cent of the population live in rural or coastal areas, any decline in agricultural production is a worry, but such dramatic declines are truly alarming.

That is why a decision by the Marape Government earlier this year to impose a new tax on fertiliser imports utterly defies comprehension! This tax will cost of the palm oil sector alone close to K60 million a year, with about K20 million to be paid by smallholder producers.

And why was the tax imposed? I am grateful to one of the strong leaders of the PNG agricultural sector, Robert Nilkare, for providing the answer!

The tax or levy on imported fertiliser was imposed as a "greenhouse gas emissions reduction measure", according to Mr Nilkare, the Chairman of the PNG Palm Oil Producers Association. As he has rightly pointed out, the greatest driver of greenhouse gas emissions in PNG is the unchecked deforestation of the nation's vast forest resources!

There is no additional tax on the destruction of PNGs tropical forests, increasingly by PRC companies, but also operators from Malaysia and other South East Asian nations.

I have spoken to a range of Papua New Guinea agricultural producers and experts. There is common agreement that the key to rebuilding income producing agriculture, such as coffee, cocoa, copra, and palm oil is fertiliser! It is especially needed today in the palm oil sector, but also in the coffee and cocoa producing areas.

What has happened in key coffee and cocoa growing areas is that people on the land have abandoned these crops and are just planting vegetables and fruit basically for the survival of their own families and communities. The people who once diligently tended crops have given up because of the absence of extension and advisory services, the cost of fertiliser and pesticides, and inadequate infrastructure, particularly rural roads.

The tax on fertiliser could not have come at a worse time for farmers, and for the Papua New Guinea economy. It is a tax farmers just cannot afford to pay, and it is a burden on even the major producers who are vital to the PNG economy.

That brings me to the key proposal I want to advance today.

A proportion of the $A2 billion which has been set aside for the AIFFP should be immediately offered to the Papua New Guinea government to jointly drive a massive program to rebuild the agricultural export sector.

While growing vegetables and other food is helping to prevent starvation in Papua New Guinea, living standards are in serious decline because cash income has been slashed as a result of lower producing AND poorer quality in the main export industries, and especially coffee.

Inevitably, lower incomes across the farm sector will affect attendances at school, the survival of regional and rural towns, transport industry employment and small business.

What Australia ought to offer to do is to A. fund the tax it has imposed on fertiliser imports rto reduce the burden on growers and industries overall, and B. Subsidise a significant increase in fertiliser and pesticides imports targeted specifically at the oil palm, coffee and cocoa industries.

North Queensland is Australia's largest fertiliser producer. Supplying Papua New Guinea with increased fertiliser and pesticides will enable small holder producers in particular to replenish crops as a priority. Properly managed it will also boost employment in rural towns and communities – most of which are really struggling today.

The cost? I have been advised that a comprehensive package of agricultural support measures, fertiliser, pesticides, and some advisory services to assist farmers properly apply fertiliser could cost no more than $150 million to $200 million a year.

It needs to be offered for at least three years – so it can be delivered in remote areas as well as areas closer to towns and ports.

With elections due in Papua New Guinea in mid-2022, care will have to be exercised in how the fertiliser is delivered and the subsidy provided. But that is not an excuse to ignore what is a glaring and growing need.

If income producing agricultural production continues to decline, or at best stagnate, living standards and opportunity will continue to suffer. The economic consequences will be disastrous. But the social and living standards consequences will be utterly tragic. The stability and unity of our closest neighbour will really be tested.

Infrastructure is important. But in my view the most urgent need in our closest neighbour today is to focus on the real living standards of the people – their basic health care, school education, safely AND their capacity to earn income especially through cash crops that can be exported.

Australia is helping with health and with education and tentatively with electricity and infrastructure such as ports. But we really need to "step up" with the one sector of the Papua New Guinea economy that can in a short period reverse the decline in living standards of the six million people who live in rural and coastal communities – agriculture for export!