7 October 1999
E&OE……………………………………………………………………………………….
PRIME MINISTER MORAUTA:
The signing of the Treaty today reflects the importance of our relationship and marks another important development of relations between our two countries and peoples. A relationship that is as comprehensive as it is enjoyed. This occasion further buttresses that relationship. When the current Treaty expires on June 30th 2000, the provisions of the successive Treaty will govern develop and cooperation between our countries into the next century.
Like the current Treaty, the new Treaty, the new Development Cooperation Treaty defines the size focus and principles that will underline development cooperation programme. The Treaty sets a predictable level of development resources over the next five years thus enabling Papua New Guinea to better plan its development strategies.
There are a number of characteristics that make the new treaty different from to the last one. While at present there is both budget support and programme aid, the new Treaty provides only the programme aid. The level has been set, agreed to at $300 Australian dollars a year, million dollars a year, in nominal terms. The distribution between various sectors will be reviewed every three years and will be set out in administrative arrangements after programming talks.
The Australian $300 million includes funds for the reconstruction and rehabilitation of Bougainville. Funds that might be needed for humanitarian and emergency assistance are also included unless both governments agree that they need additional in case of major disasters.
It is my government’s wish that where emergency assistance is to be sourced from the $300 million Australian dollars, any diversional funds from other activities in the aid programme should allow this specific request by the government of Papua New Guinea. The provision in the Treaty recognising the need to increase opportunities for Papua New Guinea individuals and agencies and businesses to benefit from participating in the aid programme is a welcome development. In my government’s efforts towards reconstruction and development, I want Papua New Guineans to be actively involved in the distribution of aid. To achieve this, it would be useful to devise benchmarks indicating the percentage of procurement and management contracts awarded to nationals. Another option would be to allow for the participation of Papua New Guinean officials in the tendering process for the award of aid contracts given in Papua New Guinea. The concepts of an incentive fund is of considerable importance to the Papua New Guinea government. It will reward best practice and allow for a greater share of the aid programme to be administered directly by Papua New Guinean agencies. It is however, important to ensure that the funds function properly with agreed guidelines and procedures before our two governments commit a sufficient portion of the aid package to it.
I am therefore pleased to announce that the incentive fund is being introduced on a pilot basis with limited funding.
This Treaty signing today brings to a conclusion the negotiations between our two governments which began in March last year. As the Prime Minister the signing of the Treaty represents an important statement by both countries. Papua New Guinea and Australia value our close ties of friendship. We remain important development partners. It is in the interests of both our countries that Papua New Guinea is a united, stable and prosperous country. The Development Cooperation Treaty is an important mechanism for ensuring that.
PRIME MINISTER HOWARD:
Well, thank you very much Prime Minister and may I say for myself and for the Australian Government that this is an important day in the relationship between our two countries. For me personally it is the first opportunity I’ve had to visit your country since becoming Prime Minister. I had intended to be here last year, but events conspired to prevent that occurring and I am delighted to have been able to sign the new agreement of which you spoke.
It is an important agreement, it represents the transfer from budget aid to project aid approach so far as the provision of Australian assistance is concerned. It does contain the important incentive elements that you mention and I think they are welcomed by both Australia and Papua New Guinea.
I can say that this afternoon I’ve had a very lengthy discussion with the Prime Minister and also jointly with him and a number of his senior Cabinet colleagues. The discussions between the two of us follow the very useful discussions we both had in Sydney there three or four weeks ago. May I say that the Australian government is most supportive of the steps being taken by the Papua New Guinean government in cooperation with the international financial funds, the international monetary fund and the world bank to strengthen and stabilise elements of the Papua New Guinea economy. I share the view of the Prime Minister, that a strong economy is fundamental to the future of Papua New Guinea. And we are very keen as your friends and partners in the region to work together. It’s important that the support of the funds, both the IMF and the World Bank be engaged and maintained and I am very pleased to note that a lot of progress is being made in discussions taking place between your Treasury and Central Bank and both the World Bank and the International Monetary Fund. And in that context I am very happy to announce this afternoon that I have indicated to the Prime Minister of Papua New Guinea that subject to the initialling of the letter of understanding between the government of Papua New Guinea and the International Monetary Fund, which I understand is likely to take place in about three weeks time, the Reserve Bank of Australia will provide a financial support facility worth $80 million United States dollars that will take the form of a deposit of the Australian dollar equivalent of that into the Central Bank of Papua New Guinea and in return a Kina account will be established out of which debt of the government of Papua New Guinea will be retired. Now this is initially for a ninety day period, but it is of course capable of rollover. It is subject to the initialling of that letter of understanding. It’s an earnest of our intention to support the government and to support the economy of Papua New Guinea. It’s also an earnest of our appreciation of the steps that have been taken in difficult circumstances by your government, Prime Minister to address the problems that face your economy. You have been willing to accept the difficulty of domestic policy change, it’s never easy, no matter who you are, what Prime Minister you are, what government, what country you’re the Prime Minister of, it’s always a challenge and I’m aware of how difficult it is here and we want to help and the assistance we are providing, I hope, will be seen very much as an earnest of that.
In the longer term, and subject to continual engagement between and understanding between the government of Papua New Guinea and the International Monetary Authorities including the World Bank, we would be looking to examine over a longer term period of time, a government to government loan which would be part of international loan assistance to provide greater long term stability and support. We believe that the economy of your country has some fundamental strengths and great resources. We understand that there have been difficulties. We respect the policy resolve that you in particular and the Members of your government supporting you are providing and that has been one of the elements that has greatly encouraged the Australian government to be involved.
So I am very pleased to be able to say that the signing of the agreement, the financial support facilities that I have announced, the foreshadowing of longer term government to government loan assistance, it’s all of the piece with our determination in proper circumstances and on a proper basis to support your country and most particularly to support your people.
We have had a long friendship and it is still very close and it will always be very close and as a friend and close neighbour we want to help. We also respect very much the steps that you are taking to address your internal challenges.
May I also say that the Prime Minister and his Ministers and I had a very lengthy discussion about the situation in Bougainville. We once again appreciate very much the steps that have been taken by the governments of Papua New Guinea over the years to address that very difficult situation. We all look towards the ultimate resolution. It has been a great drain on the resources of your country. There has been loss of, a severe loss of life. The Peace Monitoring Group, to which Australia has made a very big contribution has done a great job and we thank them for that.
And I appreciated in particular the detailed assessment of the situation provided by your foreign minister, Sir Michael Somare, and I was very encouraged by what Sir Michael had to say in relation to the situation in Bougainville.
JOURNALIST:
Can you comment on the use of Australian aid over the years – has it been satisfactory ?
PRIME MINISTER MORAUTA:
When you look over the years it’s important to understand that Australian aid was not additional to what we needed, it was an integral part. We needed Australian aid, and given that a lot of it was as budget support, it’s very difficult to identify projects and label projects. But without Australian aid we would not have managed the last 25 years.
JOURNALIST:
Did you discuss the situation in East Timor and Mr Howard in light of signs that the Indonesian parliament will ratify the ballot sooner than expected is it realistic that the UN to take over in East Timor by Christmas perhaps?
PRIME MINISTER HOWARD:
Well perhaps I’ll answer the second question first and then my colleague can answer the first question then. I’m encouraged by the signs that are coming out of Jakarta about the early ratification of the separation, but it’s far too early for me or anybody to start speculating about particular times for the United Nations to take over. It was always our understanding that the peace enforcement multinational force would be there for a period of time and then it would be followed by a blue helmet UN operation. We naturally want to see that happen as soon as it is appropriate. We’re doing a very important job at the present time and I must say as Australian Prime Minister I’m immensely proud of the tremendous job that is being done by the Australians in East Timor. But I make it very plain that they’re not doing it alone although we’re carrying the lion’s share, we’re getting magnificent help from a lot of countries, including a significant number of ASEAN countries. We had immediate help and assistance from the British and the New Zealanders and we’re very appreciative of the help we’re getting from different parts and I think it’s too early to start putting a time on when the UN may go in. They’re obviously going to go in in a full blue helmeted fashion as soon as they can, but it’s too early for me to speculate when that might be. I don’t think that’s particularly helpful.
We certainly talked about East Timor and I gave my assessment of the current situation and where I thought the position was.
PRIME MINISTER MORAUTA:
Let me first say that we, my government, supports what is happening in Timor with Australia’s involvement under the UN umbrella. At this stage resource difficulties would prevent me from making any commitment. I told the Prime Minister that at a later stage, I think it’s phase III, when it’s converted fully to UN umbrella, my government would be ready to offer whatever support we’re asked to do.
PRIME MINISTER HOWARD:
May I add that I fully understand that situation in relation to Papua New Guinea given the other constraints that operate. I do fully understand that, and appreciate very much the indication that in Phase III you will contribute to the best of your capacity.
JOURNALIST:
Mr Howard you spoke about Australia providing a loan further down the track – what sort of scope [inaudible]
PRIME MINISTER HOWARD:
Oh well it would be appropriate. It would be not insignificant, but I don’t want at this stage to start putting a figure on it because I don’t think that is appropriate. But it will be significant.
JOURNALIST:
What sort of timeframe ?
PRIME MINISTER HOWARD:
Oh well you’re looking at some time perhaps in the next year or 18 months. It would be a government-to-government loan and whereas what I announced this afternoon is a facility out of the Reserve Bank. It’s a bit of a hybrid, it’s not quite a loan but it’s not quite a currency swap, so I call it a financial support facility.
JOURNALIST:
What is the extent of the debt that you are looking to retire ?
PRIME MINISTER MORAUTA:
The government’s debt to the central bank is about a billion kina.
Well I take this opportunity let me say how grateful I am, and my government and the people of Papua New Guinea are for the support. I know that Australia is offering a helping hand. The resolution of our problems, the solution to our own problems has to come from ourselves, we have a responsibility for that and I am determined to make sure that our own house is in order before we get out to seek assistance from friends.
JOURNALIST:
Mr Morauta what sort of boost is this going to give your economy ?
PRIME MINISTER MORAUTA:
Confidence overall, but in particular the US$80 million will provide the support for kina stability, exchange rate stability that we have been lacking (inaudible)
JOURNALIST:
Would the longer term loan have specific applications as is the case with the project aid ?
PRIME MINISTER HOWARD:
Well at this stage I don’t want to be too definitive but it would be in the nature of general support, it ‘s not designed - the other is aid, we’re talking here about a loan and loans are repayable. It is a different way of providing assistance and it would be part of an international loan package designed to stabilise the debt situation and against the background of the stated determination by the government of Papua New Guinea to a number of things such as privatisation to reduce debt, so what we’re really looking for is providing general assistance. Now I don’t want to tie myself down anymore than that at this stage because we need to talk to the government of Papua New Guinea and we need to look at progress in the discussions between that government and the international financial bodies, including the World Bank. And I think it’s important that we have some further discussions about it before I get too definitive, but we are looking at something in the longer term that would be significant and it would be designed to provide general help and general stabilisation. I can say that.
JOURNALIST:
Sir Mekere, the $80m, have I got this right, is this essentially to help tide you over until you finalise your arrangments with the IMF and the World Bank ?
PRIME MINISTER MORAUTA:
It’s a revolving facility, yes.
PRIME MINISTER HOWARD:
It’s a bridging sort of …
PRIME MINISTER MORAUTA:
Yes, I want to add here that the more permanent package of loans that I am seeking, the size of it will be dependent on the case that I present to friendly governments. And I have to convince them that that package stabilises and gives me the foundation to build onto. So the size and the type is up to my government to ….
JOURNALIST:
Would it be fair to say that the Australian government decision is critical in terms of getting assistance from other countries ?
PRIME MINISTER MORAUTA:
It is critical. It also shows to other friends and institutions, lenders, banks that perhaps we do have a structure, we do have policies that can take us to where we want to go and all we need now is support.
PRIME MINISTER HOWARD:
Can I say in relation to that that one of the things that persuaded us to talk to the Reserve Bank about the provision of this support was the fact that we do see a framework of long term reform and change and the two things are related.
JOURNALIST:
Did the issue of the gas pipeline come up in discussions ?
PRIME MINISTER MORAUTA:
Yes we are both encouraged by what is happening. We want to make sure that whatever happens it sits on its own commercial basis. We can do all we can to make sure that we play our role, but in the end it is a private sector investment position. We also recognise the crucial importance of that investment to Papua New Guinea for the next 20-30 years.
Thank you very much.
[Ends]