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What can Bougainville do to run itself, post referendum?

By Matthew Vari 

Irrespective of which side of the table the result of the Bougainville referendum falls, the question still remains on what can be done in the autonomous region to build a working economy that can cater for the needs of a fiscally self reliant region.

As much as the issue of an independent or autonomous Bougainville is in the interest of the people of Bougainville, it is also in the interest of Papua New Guinea.

With the growing trend of fiscal devolution being sought by central governments, in a preliminary study from the PNG National Research Institute on Fiscal Autonomy presented last week, Professor Satish Chand from the University of New South Wales shed light into similar aspirations other provinces, apart from NCD, may look into.

As the bloody conflict in Bougainville can attest, any assumption that it has failed to be fiscally reliant since 2001 is not really fair to say. Considering in 2001 the economy was more or less destroyed. The capacity to raise revenues has been minimal with a lot of the funding being channeled through grants from the national government.

It was anticipated that overtime Bougainville will have the resources to raise its own revenues and that will be benchmarked against the definition of fiscal self reliance. According to Chand as long as the region continues to rely on the PNG Government for grants, incentives to create a fiscally self reliant autonomous will be weak.

Taxation as a solution

Chand used figures of ABG’s 2017’s recurrent budget to exemplify it K162 million (US$50 million) recurrent needs in 2017 to an estimated K1 billion (US$309 million) plus GDP for the region.

“So if you have a billion kina (GDP) and you want to raise K160 million (US$49.2 million) that is pretty easy, just tax it at 16 per cent. That sounds easy at first sight only. If you think a bit more that is not that easy because the bulk of production is non-marketed, it is subsistence. It is out in the villages, you can never tax it.”

“You quickly realise that is not much on an option. We also know as soon as you bring in a tax in a fragile situation economic activity can quickly move from the market to the village. So they disappear. Again on both of those counts this is not much of a hope,” Prof Chand said.

However, group tax will always be a key component to making up the numbers required for fiscal self reliance.

The Mining option

The quickly thought out solution many assume is the reopening of Panguna. At least many people believe that large scale mining will be the solution to all the funding needs. A belief Professor Chand says is not actually feasible.

“Well that is not true because there is moratorium on mining and even the most optimistic forecast of the restarting of BCL is 2025,”
“So I think we can kiss large scale mining goodbye. When I say this people are not too happy but that is the truth. Then we look at small scale mining which again on the estimates is a booming industry and raking in anything between K75 to K100 million (US$23 –US$30 million) of income per year.”

“The suggestion we could tax it given the capacity of small scale mining is pretty minimal. Gold you can put it in your pockets and walk across the border; it is going to be hard.”

Fisheries licensing

“The one promising avenue is revenues from licensing fees from Bougainville waters. And from all estimates from national fisheries authority and folks on Bougainville can raise up to K100 million (US$30 million),” Prof Chand said.

“And that is a sustainable source of revenue, and that would be about 60 percent of the recurrent budget. That looks like the most promising of all the sources and the rest I’d probably discount.”

Last week’s signing of an memorandum of agreement between The National Fisheries Authority and Autonomous Bougainville Government will pave the way for the region to take charge of the its lucrative fisheries sector.

Chand took a closer interest in specific broad based taxes on widely cultivated cash crops in the agriculture sector such as cocoa.

“The one that I argue strongly for is the tax on exports of cocoa at the rate of 1t for every Kina of export. For a very simple reason that I do not see that raising enough revenue, but it brings the government closer to the governed.”

“Cocoa for those of you who know Bougainville is grown from Buka to Buin, from Torokina to Tinputz, all over Bougainville. One way to draw the people together is through that tax because if you are paying tax you want services from the government.”

“On the one hand the growers can pay the tax but then in return expect services so as to grow the production of cocoa which has got good prospects in Bougainville.”

“So I think on that reason even though is not going to grow a lot of revenue, it is the tax that is going to be developmental.”

Professor Chand said with four main exporters of the cash crop, it would be pretty easy to administer. He said the same ripple effects could stimulate suburban development with the trickle effect from property taxes.

Skilled workforce vital

Chand looks at building human capital as a means to build a stronger specialised workforce. Suggesting Australia’s Pacific Labour Facility as a solution, Chand said the need to have qualified residents of the island region would be an effective step towards managing its own financial affairs.

The Pacific Labour Facility will connect Australian employers with Pacific workers, from selected island countries; get longer short-term working visas to work in an extended number of industries in Australia.
“One of the main reasons to the conflict was the import of workers into Bougainville from outside. The mine will open one way or the other given the pot of gold literally sitting there. So there is no question that there will be a mine down the track.”

“But do we want to wake up to having a mine again that we have to import workers because I think Bougainville has to be a lot more strategic in terms of sending its people for training abroad, maybe in Australia Pacific Technical College or some other similar organisation. Get them outside of the country to get work experience with the view to having them back when the mine reopens,” Prof Chand said.

Timeframe to get there

How long could a Bougainville, with all its systems organised and in place, take to be fully able to cater for it operational needs?

“At the one level the answer to this question is very simple. We sort of know how much Bougainville would need to provide the current level of services.”

“The next question is saying how fast can the economy grow, and from experiences elsewhere that the fastest rate that is possible verses what we have experienced so far. If you grow very fast then you can achieve that target within a decade, but if you don’t grow at all you will never get there.”

“But once you know how much you need you can work backwards, that means that we need developmental taxation. That means we have to have policies and resources targeted at growing the economy.”

“Look Bougainville has a lot of resources. I am not just talking about gold silver and so on. The people are its biggest resource. The challenge is to utilise the resources for development. That is the challenge,” Chand said.


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