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Andrew Mako says the PNG government is spending a lot of money on the slush fund given to MPs.
Photo: RNZI/Johnny Blades
Politicians in Papua New Guinea will soon consider the country’s 2025 budget, after a turbulent year that has seen many communities suffer.
Academic Andrew Anton Mako, who works with both the University of PNG and the Australian National University’s Development Policy Centre, said MPs should learn from how Fiji has helped people in the short term.
This includes changes in the way the goods and services tax (GST) is applied and more targeted spending on social transfers.
Anton Mako spoke with Don Wiseman.
(The transcript has been edited for brevity and clarity.)
Andrew Anton Mako: So this year we started in early January with a riot that really rocked the nation. And then we had a vote of no confidence on the political front. But I think the most important problem facing this country is actually on the economic front. It has been a difficult year, especially for middle- and low-income earners, due to the high cost of living people face. So if the government could review some policies in the upcoming national budget and especially take some measures to alleviate the high cost of living pressure that people are facing.
Don Wiseman: The Constitution of PNG contains the rule ‘to achieve an equitable distribution of income’. And one of the ideas that I think you’ve been looking at is what Fiji has done. How would that apply?
AAM: Yeah, so Fiji has done a lot of things in recent years and in this year’s budget they’ve put together programs that would actually help put money in the pockets of low-income households, including tuition assistance, disability assistance, money to help pregnant women to help in rural areas and a number of other programs. Another important tax policy they have put in place is to introduce two sets of VAT or GST (Goods and Services Tax). So 0% for basic goods and services that low-income earners depend on for everyday purposes. And they also set another rate, 15% on goods, services and items that can be afforded by people with higher incomes. I think this policy could be replicated in Papua New Guinea.
DW: PNG has a 10% blanket at the moment, right? If the GST on basic food items were abolished, would a higher GST raise the same amount of money, or more?
AAM: You should balance it. Of course there has to be some economic modeling around it, but I think it’s fair to say that GST could be scrapped from basic food items like flour, sugar and canned fish, cooking oil, the basics, that you know the low income earners depend on on a daily basis their daily livelihood, right? We can do that and then perhaps increase VAT on other goods and services that can be provided by high-income earners. I think that can be easily balanced. The PNG government has done a number of things to support people on low incomes, including raising the tax-free income threshold to 20,000 kina. But I believe we can do much better. I also mean much more than that. And then Fiji offers very good examples.
DW: One of the other things about the Fiji system that you’re really excited about is their social transfer system. And you touched on this, I think, at the beginning in terms of money for pregnant women and whatever, and what we’re talking about is much broader than that, in terms of the elderly and the disabled and so on. on. But how do you get that money to these people?
AAM: In Papua New Guinea it is a challenge. So Fiji has set up a system whereby they have a robust system through which these transfers can be made. But in Papua New Guinea, this doesn’t mean we can’t try. We might take a year or so to put the systems together and maybe work with the private sector, maybe with the cell phone companies and so on, to get help, financial help, to the people who deserve it, like people with disabilities, the elderly people. I think these people deserve to be helped. Right now the PNG government is spending a lot of money on the slush fund given to MPs. We have seen over the years that that money is usually not well spent. We have a lot of management problems with that. So I think we should at least cut some of this money and then allocate it to people who really need it, the disabled, the elderly. I think that would make a big difference in the lives of our many Papua New Guineans.
Andrew Mako says the January riots were the result of many underlying factors, including crime, corruption and a lack of basic services.
Photo: STRINGER
DW: You would say that those January riots were a very important event in terms of what they indicated about the discontent and unhappiness in the community. And you would think that improving the tax system in this way might alleviate that.
AAM: Yes, you know, the government has to show that it is doing something to help the people. I mean, during the January riots, there were a lot of factors. There are many underlying factors: crime, corruption and lack of basic services. And then there’s the high cost of living that people face. And to be honest, Papua New Guinea has always been a high-cost economy in terms of the high cost of security, the high cost of providing basic services and the like. That doesn’t mean we should just leave it like that. The government must come up with policies so that the cost of doing business and the cost of providing services in the country must come down. And some of the measures that we could take are long-term measures that the government can take so that the structure of the economy is reformed so that the cost of doing business in PNG comes down. These are long-term plans. But in the short term, the article that I put together with Professor Stephen Howes is actually about short-term measures, short-term measures that can be put together to alleviate the high cost of living pressures that people are currently facing. So things like having two GST rates in the country, one zero rate for basic food items, social transfers. Currently, the government provides school fee support. Those things are important. We need to do more so that people see that the government is doing something to tackle the high pressure on the cost of living in the country.