PAPUA NEW GUINEA: FORMER PM FEARS 'SOCIAL IMPLOSION' IF LNG

C O N F I D E N T I A L PORT MORESBY 000180


STATE FOR EAP/ANP AND INR/B
AID FOR ASIA/EAA CHERYL JENNINGS
BANGKOK FOR USAID/RDMA

E.O. 12958: DECL: 9/21/2019
TAGS: PREL PGOV EAID PP
SUBJECT: PAPUA NEW GUINEA: FORMER PM FEARS 'SOCIAL IMPLOSION' IF LNG
FUNDS MISSPENT

CLASSIFIED BY: Paul Berg, Charge d'Affaires, Embassy Port
Moresby, Department of State.
REASON: 1.4 (b),(c)


1. Summary. Leader of the Opposition and former Prime Minister
Sir Mekere Morauta told us he fears a `social implosion' if
Government proceeds from Exxon Mobil's LNG project flowing into
Government-supervised trust accounts is misspent. He said
current PM Somare, who served briefly as Foreign Minister during
Mekere's time as Prime Minister, is weak and does not know what
steps to take next on allocating trust account monies. He said
the Somare Government's inability to provide adequate guidance
and coordination to foreign donors forces them to make
assistance decisions unilaterally. Mekere said Somare would
welcome advice from foreign donors if provided `gently' rather
than forced down his throat, and in this regard urged creation
of a Friends Of PNG group overseas comprising major
international donors such as Australia, People's Republic of
China (PRC),World Bank, Asian Development Bank (ADB),New
Zealand, UK and U.S. End summary.


PM Somare `Weak Leader Who Doesn't Know Where To Begin'


2. Papua New Guinea's current Leader of the Opposition and
former Prime Minister (1999-2002) Sir Mekere Morauta, 63,
lamented the shortcomings of the current Prime Minister, Sir
Michael Somare, 73. `I know Sir Michael well; he was my Foreign
Minister (briefly in 1999.) His first problem is leadership.
He is simply not a strong leader. His other problem is that he
does not know where to begin work on solving Papua New Guinea's
problems.'


3. Mekere opined that a Prime Minister of Papua New Guinea
enjoys greater powers than a President of the U.S. or Prime
Minister of Australia. In Australia and the U.S., he explained,
there are well-developed political parties, including organized
factions within ruling parties, which limit a leader's power.
In PNG, he said, everything depends on the Prime Minister,
making him in practice `close to a dictator,' especially given
new laws Mekere passed during his term to promote political
stability, reducing the frequency of votes of confidence and
parliamentary challenges which had kept PNG politics volatile
and unpredictable in preceding years. He said these very laws
had enabled Somare to remain in office since 2002, adding that
`political stability alone has not been enough to guarantee
development.'


Principal Donors Should Jointly Provide `Gentle' Guidance


4. Mekere turned to the most urgent issue facing the Government
of Papua New Guinea, how to spend the billions in U.S. dollars
expected to flow into government-overseen trust accounts from
Exxon Mobil's construction of a liquid natural gas (LNG)
project. `The Government doesn't know which steps to take first
with the money,' said Sir Mekere. `Somare does not know what to
do; the whole Government needs some gentle advice from the
outside.' He paused, took a moment to reflect, then added,
`they want your advice, they want advice from the donors, but
they do not know how to ask for it. Your advice must be given
gently. You must -- gently -- take us by the hand. We do not
want to feel we are being dictated to.'


5. Mekere acknowledged it would be awkward for any one foreign
country or institution to apply pressure on PNG unilaterally.
`You should not do it alone,' he said. Instead, he suggested
that major foreign donors form an informal Friends Of Papua New
Guinea group overseas to coordinate recommendations. `It should
include all the major donors: U.S., Australia, China, World
Bank, ADB, New Zealand, and the U.K.,' he suggested. Ideally,
he said, the Prime Minister himself would ask donors to form
such a group.


Papua New Guinea At Risk Of `Social Implosion' If LNG Funds
Misspent


6. Stressing the urgency of his proposal, Mekere said that PNG
would `implode' if the trust account funds are not spent wisely.
Popular expectations are high; ordinary citizens expect the
inflow of revenue to the Government treasury will improve their
daily lives. He said he fears the social consequences if rising
expectations are dashed, if a few get rich but the rest get
poorer.


7. Mekere scored the Government's lack of coordination, proper
planning or practical understanding of next steps. `Right now,'
he said, `AUSAID is out of control. I don't mean that Australia
is being naughty. What I mean is that, out of desperation over
lack of Government direction, they are funding projects of their
own choosing. The Government cannot truly be said to be in
charge of how and where foreign assistance is spent. ` He said
the PRC's assistance, too, is `out of control.' Note: Papua
New Guinea receives more AUSAID assistance than any other
country, approximately USD 337,000,000 in overseas development
assistance (ODA) during the 2008-2009 period, concentrating on
governance, economic growth, improved service delivery and
HIV/AIDS. PRC non-military assistance is considerably less but
difficult to ascertain with precision; according to the PRC
Embassy, it is not provided in the form of ODA but rather as
`soft assistance,' often as exchange. We nevertheless speculate
PRC's total non-military assistance could amount to as much as
USD 15-20 million, based on our conversations with the PRC
Ambassador. U.S. assistance during the same period totals
something under USD 3,000,000, primarily for HIV/AIDS and the
Coral Triangle Initiative. End note.


8. As an example of poorly planned assistance, he cited money
spent on various infrastructure projects such as road building,
new schools and hospitals. `Our problem is not a need for new
infrastructure. At this point, we cannot even maintain the
infrastructure we have. Instead of building new hospitals, we
need to maintain the ones we have. Instead of new roads, we must
repair the ones we already have. Many are next to impassible at
present. Yes, we must treat some of the symptoms of our
underlying ills, such as strengthening law enforcement to deal
with crime. But it's even more important that we address the
long-term causes.'


9. Comment: Younger opposition Members of Parliament have
expressed their frustrations over dealing with Mekere's party
leadership. They admire his intelligence and respect his
experience but find him far too reflective and diplomatic
towards the Somare Government when they would like to go on the
attack. He struck us, too, as circumspect and diplomatic, no
firebrand, but we find his analysis compelling. He has
designated two trusted colleagues, MP Sam Basil and MP Paru
Aihi, to discuss his Friends proposal with us in further detail.
End comment.


BERG