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Wednesday, 1 November 2000
Page: 21908

Mr JULL (7:05 PM) —Papua New Guinea recently celebrated its 25 years of independence. It has been 25 years of mixed results and, while Papua New Guinea remains a robust parliamentary democracy, it has endured tough economic times, appalling government mismanagement—especially during the Skate regime—and serious internal conflicts and tensions such as the rebellion on Bougainville. It is a tribute to the remarkable resilience of the 4½ million people of Papua New Guinea that they have maintained their faith in parliamentary democracy, even though their faith and tolerance must have been sorely tested. But the most sinister and most disturbing development, especially in recent years, has been the growth of massive high level corruption. This corruption, accompanied by gross mismanagement and abuse, has eroded the financial standing of some of Papua New Guinea's key state owned institutions.

The nation's largest bank, the Papua New Guinea Banking Corporation, has been placed under the administration of the Reserve Bank of Papua New Guinea. But there are even more disturbing examples. The two state owned entities which have suffered worst of all from corruption and mismanagement are the National Provident Fund, set up in 1980 to provide a pension scheme for workers, and Motor Vehicle Insurance Ltd, which is the sole provider of compulsory third-party motor vehicle insurance. Until recent years these entities were well managed and had abundant funds, more than adequate to meet worst case scenarios. Today Motor Vehicle Insurance Ltd is in receivership. There is real doubt that it has any capacity to meet payments arising from death or injury in motor vehicle accidents. Only a few years ago the insurance company had assets of around 200 million kina. The National Provident Fund has suspended the payment of benefits to contributors, including those to workers who retire or the families of workers who die, at least until the beginning of 2001. It has also been widely reported in the PNG media that the funds of contributors will be written down by up to 50 per cent.

Papua New Guinea has no social service benefits systems. The National Provident Fund was set up as a compulsory superannuation or pension fund for workers. It derives its funds from compulsory payments by both employees and employers. The current Prime Minister, Sir Mekere Morauta, has been left with the unenviable task of cleaning up the corruption, mismanagement and incompetence in virtually every state owned business or corporation, incurred during the administrations of his most recent predecessors, Bill Skate and Sir Julius Chan.

He has set up a commission of inquiry into the National Provident Fund, headed by a highly respected Australian lawyer and former PNG judge, Mr Toss Barnett. Last week, the inquiry heard direct evidence about massive high level corruption. One of Japan's largest and most respected companies, Kumagai Gumi, was contracted by the NPF to build an office tower in Port Moresby. The cost of the building blew out massively, and it is only about 10 per cent occupied. Executives of Kumagai Gumi were called before the inquiry to explain why the cost had blown out, which has contributed significantly to the NPF's financial problems. The evidence they gave exposed alarming high level corruption. In December 1998, the executives were called before the newly appointed chairman of the NPF board—a prominent Papua New Guinea lawyer—who told them that he needed money urgently and asked them for around 1½ million to two million kina. The executives asked for time to consider such an extraordinary request, hoping the chairman would forget about it. But a month later he called them again and threatened to stop work on the building project. He then demanded 2½ million kina, which, regrettably, Kumagai Gumi paid, and they tacked the amount onto the cost of the project for the National Provident Fund to pay.

At a time when the new Prime Minister is trying to clean up this mess, I believe some assistance can be given by the Commonwealth and the states of Australia to try to bring Papua New Guinea to some state of normality. Both the Commonwealth and the states have available resources that Papua New Guinea desperately needs. I believe we need to offer the full assistance of the Australian Securities Commission, the Australian Federal Police and officers from other agencies who can help trace the apparent investment of corrupt and defrauded funds in real estate and in other areas in Australia. The states should be asked to offer assistance as well. ICAC in New South Wales and the CJC in Queensland have the resources that Papua New Guinea obviously desperately needs. It is vital that the government of Papua New Guinea be asked to advise what assistance it does need, but that should not stop us from making offers now. Not only is it overwhelmingly in our interests for Papua New Guinea to be a stable democracy but also corruption needs to be detected and punished, for it is political and bureaucratic corruption that poses the greatest threat of all to Papua New Guinea's stability, democracy and future. The government of Papua New Guinea is making tough decisions to restore integrity to government. I believe it is our job in Australia to give whatever assistance we can.