New PNG Leadership provides Opportunities for Australia

17 August 2011 FDI Team

Background

The appointment in August of Peter O’Neill, leader of the People’s National Congress, as Prime Minister of Papua New Guinea (PNG), will provide much needed stability for the state. As Mr O’Neill outlines his new agenda for PNG, Australia should seek to re-engage with its troubled neighbour.

Comment

Throughout its history, PNG governance has been assured by the strength of coalition governments. Yet, the shift in alliances within the coalition government elected in 2007, produced the change in leadership to Mr O’Neill’s minority Peoples National Congress party, from ex-Prime Minister Sir Michael Somare’s, formerly dominant, National Alliance Party. Currently the stability of this new government is constitutionally assured over the next 12 months, until planned national elections in June 2012. Scepticism, however, remains about the impact of the internal challenges produced by this form of handover on PNG’s relations with Australia.

Crucially then, Australia must position itself to re-engage with the new government on mutually beneficial aspects of Mr O’Neill’s new national agenda. Key policies include Australia’s engagement within the PNG Liquefied Natural Gas (LNG) project and, negotiations for the reopening of the Manus Island asylum-seeker detention centre.

Australia must pursue a smooth transition of relations with the new cabinet, while seeking to avoid any repercussions following Mr O’Neill’s promise to establish an independent commission against corruption (ICAC) to investigate public, political and private sector corruption. Currently the reshuffle of power has ensured relative stability to the PNG LNG project, with former petroleum minister William Duma retaining his position.

The LNG project is a US$15 billion dollar investment that is currently set to come online in 2014. Yet proper management of the revenue from the PNG LNG project is crucial for future relations between Australia and PNG. Previous Australian involvement led to the establishment of sovereign wealth funds, to manage project revenue effectively and ensure re-investment of the resource wealth into the wider PNG economy and to complement foreign aid investment.

Mr O’Neill has further attempted to bolster Australian-PNG relations, by agreeing to preliminary discussions, regarding the future of the Manus Island asylum seeker detention centre. Australian use of the Manus Island facility will provide political and economic “win-win” outcomes for both nations, and strengthen fledging relations between Mr O’Neill’s and Ms Gillard’s governments. 

Continued pursuit of Australian foreign policy objectives in PNG must survive speculation that Mr O’Neill’s new government ‘hijacked’ the Parliament. Although ratified by Governor-General Michael Oglio, the new government still faces legal objections by ousted former acting Prime Minister Sam Abal. The next month will see the future success of the new PNG government outlined. It will have limited time to pursue its goals and justify its position, before momentum stalls under the pressure of looming national elections next year. 

Daniel Ossevoort

FDI Research Intern

Northern Australia Research Programme

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