PNG wants direct budget aid from Australian taxpayers

Prime Minister Malcolm Turnbull with PNG Prime Minister Peter O'Neill at Parliament House in Canberra on Thursday 3 March 2016. Photo: Andrew Meares Photo: Andrew Meares
Prime Minister Malcolm Turnbull with PNG Prime Minister Peter O'Neill at Parliament House in Canberra on Thursday 3 March 2016. Photo: Andrew Meares Photo: Andrew Meares

Papua New Guinea has made an extraordinary surprise request for Australian taxpayers to pump $550 million cash into its coffers each year.

The move would see Australia's entire aid grant each year deposited into the PNG budget to fund schools, hospitals and infrastructure, despite persistent allegations of local corruption and mismanagement.

The request, which came without warning to foreign minister Julie Bishop, poses a major headache for the Turnbull government.

As host of the Manus Island detention centre, PNG is still crucial in Australia's strategy to stop asylum seeker boats, even as moves are underway to mothball the camp.

PNG Prime Minister Peter O'Neill has previously boasted about winning greater control over the multimillion-dollar aid program from Australia as a sweetener to accept asylum seekers.

This latest request came as Ms Bishop was in the northern town of Madang for annual talks between senior ministers.

"That's apparently a matter that's been discussed within the PNG government; it's been raised with us today and we'll consider it," she said, according to ABC News.

The PNG economy has been savaged in recent years after a sharp drop in global commodity prices, especially in natural gas, leading to concern over cash shortfalls.

The national health budget alone was slashed by almost 40 per cent last year, with money shifted into slush funds for local MPs loyal to the government to spend as they saw fit in their electorates.

Australia has also agreed to help the impoverished country meet the costs of hosting the 2018 APEC meeting, something that is likely to run into the millions of dollars.

ABC reported PNG Planning Minister Charles Abel denied the request for direct budget support was a consequence of the country's economic troubles.

"It's a policy-based directive that has come from a series of documents ??? it's not a knee-jerk reaction," he said.

Australia has said it will provide $558.3 million in aid to PNG this financial year. The island nation is the largest recipient of Australian aid, dating back to 1975 when the country achieved independence.

But despite the support, PNG has persistently fallen short of development targets.

A move to directly fund the PNG budget would turn back the clock in Australia's relationship with its former colony, after a change was made in the 1990s to deliver aid through specific programs due to concerns over cash being squandered.

PNG has since complained about losing control over where aid money is spent and past examples of profiting by foreign contractors and consultants.

"We would like to see a larger proportion of the budget actually going into hard, tangible, on-the-ground outcomes," Mr Abel said, adding he'd like the change to be in place by 2020.

Australia has already committed an additional $200 million to build a hospital in Lae as part of the Manus Island deal, despite the promise of matching funds from PNG never being honoured.

Australia also agreed to $8.5 million in "design work" for the Madang-Ramu highway on the PNG east coast, only for a local minister to complain Australia had failed to lay asphalt, despite it not being part of the commitment.

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Design work to repair Ramu highway was part of the deal Australia struck with PNG to host Manus Island detention centre.
Daniel Flitton
Senior Correspondent

The crumbling Madang - Ramu highway Photo: PNG Loop

Australia's present arrangements on aid to PNG expire at the end of this year. Ms Bishop said budget support was "not the model that currently exists" and the government wanted to ensure the aid program was transparent.

"That it's value for money and it provides the kind of outcomes that will see economic development and prosperity here in PNG," she said.

"And of course we must be answerable to the Australian taxpayer."

Immigration Minister Peter Dutton also attended the talks in Madang.

This story PNG wants direct budget aid from Australian taxpayers first appeared on The Sydney Morning Herald.