The Welfare State, South Pacific Style

Not quite two weeks ago I visited Daru, a town of some 20,000 people on an island of the same name situated near the mouth of the Fly River in the southwestern part of Papua New Guinea. Daru is the current administrative capital of Western Province, a vast area about the size of Maine and New Hampshire combined, with some 150,000 inhabitants and a mere 50 miles of road. The Fly River itself, together with its tributaries, is the main thoroughfare of the province down which barges full of copper ore from the Ok Tedi mine and rafts of logs have been floated down to the sea to be taken to Japan and China and other destinations. The Fly is also the superhighway along which, twice a year, the inhabitants of the North and Middle Fly districts travel hundreds of miles in dugout canoes and aluminum dinghies with Yamaha outboard motors down to Daru to collect their “compensation” payments.

The Ok Tedi mine, opened in the late 1960s, remains one of Papua New Guinea’s largest sources of public revenue and foreign exchange earnings, yet Western Province remains one of the country’s poorest and least developed areas. The mining giant BHP (later to become BHP Billiton) owned the mine and at some point contaminated some portions of the upper river with cyanide and other pollutants from its gold operations. Each family certified as a recipient is entitled to 180 PNG kina (about $67) a year for each family member, so making babies of one of the more lucrative occupations the province has to offer as well as one of the few forms of entertainment available to all but those rich enough to buy a satellite dish. Roughly a third of the province’s population is certified as beneficiaries.

The tide was out the afternoon I arrived, leaving scores of boats stranded on the mudflats of the harbor. The payout wasn’t scheduled for another couple of weeks but already people and boats had started to trickle down the river, and the area resembled a combination scout jamboree, village market, and drunken frat party. The festivities generally go on until the money runs out, either drunk during the festivities or spent on provisions – pallets of beer, sacks of rice, and cartons of ship’s biscuit, SPAM, batteries, cigarettes, and canned fish – to carry back upriver.  Naturally, this is a bonanza for the three or four Chinese-owned supermarkets on the island, which constitute the only businesses apart from the island’s sole fuel distributor and a company that ships fish fillets and frozen lobster to Port Moresby, Australia, and the United States. One of the Chinese supermarkets also operates a hotel, as does the fish processor.

Daru Harbor at Low Tide

That’s pretty much it for the economy except for the provincial government and the local outposts of the national government and state-owned companies like PNG Power, PNG Ports, and the National Broadcasting Corporation, which are by far the largest source of both employment and cash.  The only other contender is the PNG Sustainable Development Program (SDP), a state-owned entity that took over BHP Billiton’s shares of Ok Tedi in exchange for the government’s assumption of all future environmental liabilities. Some two-thirds of its share of the proceeds from the mine is placed into a fund intended to develop other sources of economic growth and income to replace the mine itself, which is scheduled to shut down in 2013. There is talk of extending the life of mine by another seven years, but after that, even if copper and gold prices go through the roof, it will be uneconomical to operate.

The SDP sits on nearly a billion dollars of accumulated profits from the Ok Tedi mine, and it has a number of near-term projects that could be feasible and make a difference, as well as a few what it calls “transformational” projects to be undertaken sometime during the next 20 years or so, which could profoundly change the province’s economy and society.  The near-term projects include some roads to be co-financed with the World Bank as well as a large-scale aquaculture project and a few initiatives related to rubber and oil palm cultivation and processing. The mega-projects include a deepwater port on Daru Island, which could cost as much as $1 billion if the proposed liquefied natural gas (LNG) plant is included; the gas project itself, which depends on discovery of commercially exploitable quantities of gas (exploration is underway); and attraction of energy-intensive aluminum and steel smelters, which would justify the construction of the deepwater port but would themselves depend on development of a 10,000-plus megawatt hydroelectric power station in neighboring Gulf Province and construction of a high-voltage transmission line over hundreds of kilometers of trackless mountains, forests, and swamps.

I have written before on this blog about the importance of building roads in underdeveloped areas, and it is hard to see how much economic development can take place without a way to move people and goods at a reasonable cost, but I am stymied by this problem. How, in such a huge area with such a small and dispersed population, do you decide where to build the roads and how do you assess whether they make economic sense? The number of assumptions you have to pile one on top of another soon makes hash of any attempt to arrive at realistic calculations and projections. If it costs, say, a million kina to build one kilometer of all-weather road, how many millions does one spend to benefit, say, a few thousand or even a few hundred people? If you built the road, who would maintain it and for how long and with what funds? Is it possible that continued cash handouts are the most cost-effective answer?

There is no question that the current system of handouts has destroyed most of what passes for private initiative. The owner of the fish factory, a local boy who went away to get an education and came back to start a successful business, puts his finger on the problem. His moist skilled fisherman make 90,000 kina, or $33,000 a year, a huge sum in a place where there is next to nothing to spend money on. You or I might think about saving these earnings to buy a boat and a truck and go into the fish processing business for ourselves, but this fisherman spends his money on betel nut, drink, and women, and has to buy a line and bait on credit when he decides he needs to go make some money. The Chinese-owned hotel where I stayed served an excellent sliced barramundi (the local fish) with ginger and onions, but when I asked for vegetables the waitress said, “We don’t serve vegetables.” And when I went to look in the local market, I found none. Why, I asked, does no one plant a vegetable garden? There is plenty of fertile land and abundant water. I was met with shrugs.  The idea had occurred to no one.

As government has grown, the population of Daru has grown, by most estimates doubling since the last census in 2000. The water supply has not kept pace. As a result, there is no water to operate a sewage system or even proper septic tanks, so human waste is collected in “night buckets,” whose contents are emptied into trucks that discharge it into the ocean at “Perfume Point,” where the ships from Port Moresby unload their containers and the municipal rubbish is also dumped.

Daru, "Perfume Point"

Water is transported via an underground pipe from a reservoir on the mainland, and is stored on the island in a 400,000 liter tank, which was adequate for 10,000 people but not for 20,000, and diarrheal diseases are common, especially among children under five, who are especially vulnerable. The pump and pipeline have a fixed capacity, but if they were kept working around the clock they could keep a second tank full. It would cost no more than $500,000 to buy and install such a system, but disputes between the PNG Water Board, local land owners, and the provincial and national governments have prevented it from being done. SDP, for all its good intentions, has been unable to break the logjam.

I wish I could say Daru is an isolated case, but it’s not. I will write about my visit to Kerema, an even smaller and more remote provincial capital, in a subsequent post. But recent events just outside Port Moresby show that the handout mentality is widespread and growing throughout the country.  During the weekend of January 31-February 1, savage fighting broke out between the villages of Porebada and Boera, situated between the city and the site of the future LNG plant, which ended with four Porebada villagers dead.  Though ExxonMobil and its partners in the LNG consortium vigorously deny it, it the violence is almost certainly the result of simmering disputes over who owns the land the plant is to be built on, a question whose implications can be valued in the millions. Exxon is blamed for having failed to get the informed consent of the villagers involved, but this kind of dispute is all too common in PNG, where 97 percent of the land is under customary/tribal tenure, where clear title is almost impossible to establish, and where even if land has been duly purchased and registered someone is bound to turn up to say the land was not the seller’s to dispose of.

A week or so later, the conflict was on its way to being resolved, in a modern variant of traditional PNG style. The normal way these things would happen is that the Porebada villagers would demand compensation from the Boerans for their dead brethren, and if the Boerans failed to satisfy the demand the Porebadans would take their compensation – cash, pigs, women – by force. This, invariably, would lead to further loss of life and an ongoing cycle of raids and retaliation. This time, the Porebada villagers demanded compensation of 700,000 kina and 50 pigs, not from Boera but from the ExxonMobil consortium. On February 10 the Porebada village headman presented the list of demands to the Central Province Governor and the local Member of Parliament in a ceremony that resembled nothing so much as a celebrity charity event conducted in front of the TV cameras. Even the manly arts of war, it seems, have been subordinated to the ethos of the handout and the welfare state.

I don’t fully subscribe to the notion of the Noble Savage. For the most part, there is nothing terribly noble about the savage life. At the same time, it is beyond tragic to contemplate the descendants of Crazy Horse and Geronimo, resourceful Kalahari Bushmen and ferocious Papuan cannibal chieftains, living in squalid encampments with nothing to do but drink and wait for the next handout to arrive. It’s a fate, however, that awaits any society that has what another, more powerful, one covets. Murderous greed does eventually give way to well-intentioned efforts to bring redress and comfort to the victims, but if you judge by results there’s rarely much difference between the two.