Papua New Guinea set for costly, unpredictable poll

Papua New Guinea is about to start its ninth general election, with voting taking place between June 24 and July 8, followed by counting over subsequent weeks. The coalition government led by Prime Minister Peter O'Neill enters the election under siege, facing battles on political, legal and economic fronts.

From the outside, O'Neill looks to be in a strong position. His government holds a significant majority in parliament, and the opposition is fractured. However, alliances in Papua New Guinea are often unstable, and the result of the election is far from certain.

O'Neill, then treasurer, wrested power in 2011 from long-serving Prime Minister Sir Michael Somare, widely known as Papua New Guinea's "Grand Chief." The country was starting the construction of its largest natural resource project, a $19 billion liquefied natural gas project that was expected to transform the nation's economy.

Anticipating overflowing coffers, the government made bold expenditure commitments, including free education, free healthcare and a massive decentralization program. The expected windfall from the project even emboldened the prime minister to make a dubious deal to acquire a stake in Papua New Guinea's largest company, Oil Search, an oil and gas explorer that has a stake in the LNG project.

The government also committed to hosting the Asia-Pacific Economic Cooperation leaders' summit in November 2018. The summit, which will attract thousands of delegates and journalists, will be the largest conference gathering ever held in Papua New Guinea.

O'Neill thought he could have it all, and had commodity prices remained at historic highs he might well have been right. Instead, the resources-dependent economy was hit hard by the collapse of global commodity prices at the end of 2014.

The dramatic fall, combined with record deficit spending, has left the government in an untenable fiscal situation, worsened by an overvalued exchange rate -- a result of central bank policy propping up the domestic currency -- that is choking private sector investment.

Government revenues per capita have collapsed to 2004 levels after adjusting for inflation and population growth, and are expected to remain low for the foreseeable future. The government has responded by slashing its budget, but has protected major expenditure items, resulting in deep cuts to essential services.

It is easy to see how all of this could have worked out better for the government. The economy was hit by the global downturn at the worst possible time, only two years into the government's five-year term. But the government has not done itself many favors in the sluggish way it has responded to its sudden reversal of fortune. Whatever advances the government has made during its five-year tenure have been outweighed by unforeseen and unnecessary backward steps.

Other cracks have formed around O'Neill. Numerous allegations of corruption came to a head last year with student protests that ended in violent clashes with police. Corruption has become a lightning rod for broader frustration about the country's problems, which goes far beyond the actions of the prime minister. But the allegations have distracted him from the task of managing Papua New Guinea's weakened economic position, especially as the election approached.

Papua New Guinea is about to start its ninth general election, with voting taking place between June 24 and July 8, followed by counting over subsequent weeks. The coalition government led by Prime Minister Peter O'Neill enters the election under siege, facing battles on political, legal and economic fronts.

From the outside, O'Neill looks to be in a strong position. His government holds a significant majority in parliament, and the opposition is fractured. However, alliances in Papua New Guinea are often unstable, and the result of the election is far from certain.

O'Neill, then treasurer, wrested power in 2011 from long-serving Prime Minister Sir Michael Somare, widely known as Papua New Guinea's "Grand Chief." The country was starting the construction of its largest natural resource project, a $19 billion liquefied natural gas project that was expected to transform the nation's economy.

Anticipating overflowing coffers, the government made bold expenditure commitments, including free education, free healthcare and a massive decentralization program. The expected windfall from the project even emboldened the prime minister to make a dubious deal to acquire a stake in Papua New Guinea's largest company, Oil Search, an oil and gas explorer that has a stake in the LNG project.

The government also committed to hosting the Asia-Pacific Economic Cooperation leaders' summit in November 2018. The summit, which will attract thousands of delegates and journalists, will be the largest conference gathering ever held in Papua New Guinea.

O'Neill thought he could have it all, and had commodity prices remained at historic highs he might well have been right. Instead, the resources-dependent economy was hit hard by the collapse of global commodity prices at the end of 2014.

The dramatic fall, combined with record deficit spending, has left the government in an untenable fiscal situation, worsened by an overvalued exchange rate -- a result of central bank policy propping up the domestic currency -- that is choking private sector investment.

Government revenues per capita have collapsed to 2004 levels after adjusting for inflation and population growth, and are expected to remain low for the foreseeable future. The government has responded by slashing its budget, but has protected major expenditure items, resulting in deep cuts to essential services.

It is easy to see how all of this could have worked out better for the government. The economy was hit by the global downturn at the worst possible time, only two years into the government's five-year term. But the government has not done itself many favors in the sluggish way it has responded to its sudden reversal of fortune. Whatever advances the government has made during its five-year tenure have been outweighed by unforeseen and unnecessary backward steps.

Other cracks have formed around O'Neill. Numerous allegations of corruption came to a head last year with student protests that ended in violent clashes with police. Corruption has become a lightning rod for broader frustration about the country's problems, which goes far beyond the actions of the prime minister. But the allegations have distracted him from the task of managing Papua New Guinea's weakened economic position, especially as the election approached.

All elections are local

Papua New Guinea elections are a vibrant and colorful display of democracy. This year 3,332 candidates are competing for 111 electoral seats to represent the population of almost 8 million. The diversity of Papua New Guinea's communities, and the remoteness of many parts of the country, make the two-week election a logistical marvel given the wide differences between highland, island and urban areas.

The process is also extremely expensive -- on a per capita basis, Papua New Guinea's 2012 election was the world's most costly. Money politics is also prevalent throughout the country, with candidates amassing large war chests (and often large debts) to distribute in return for votes.

The stakes have also been raised by the decentralization initiative, which has given sitting lawmakers much more discretionary funding through the national budget, which they are able to disperse in their electoral areas. However, high levels of pre-election spending witnessed in 2012 have not recurred, reflecting the state of the economy.

Chronically underfunded, the National Electoral Commission has struggled to update the electoral roll. Funding budgeted for security and management of the poll has also been cut by the government. All these factors have combined to make the vote more unpredictable than ever.

Because of the extreme localism of politics in Papua New Guinea the election should be seen as 111 separate polls, in which services and infrastructure within constituencies attract more interest than the antics of political leaders in Port Moresby or national-level policies.

In this local battle, sitting members have traditionally had little advantage, with elections routinely ousting half of the country's MPs. This localism and high turnover results in multi-party coalition governments, formed through opportunism rather than unified policy platforms.

The tenuous nature of O'Neill's outgoing coalition leaves him vulnerable. The 18-member opposition, made up of three major parties, and led by O'Neill's one-time treasurer Don Polye, may not seem threatening in the face of 93 pro-government MPs. But alliances are shaky, and Polye has maintained a strong and consistent message against O'Neill.

Equally likely could be a move against O'Neill from within the governing alliance. O'Neill's treasurer Patrick Pruaitch was recently sacked after publicly criticizing the government's economic management, in what could be a pitch for the top job.

Former prime minister and noted reformer Mekere Morauta is re-entering the political fray, and others are waiting to see which leader can provide them the greatest opportunity. In "the land of the unpredictable," as Papua New Guinea is often called, people make bets on elections at their own risk.

With the election upon him, O'Neill's leadership has not met the lofty expectations set by many when he became prime minister. As the face of a new generation of leaders, O'Neill had a solid track record as treasurer, condemning corruption and pushing for more funding for rural areas and free health and education.

His response to considerable adversity has disappointed many. But it is not clear who could have done better. Perhaps an answer will emerge in the coming months.