Melanesia's resources boom - a blessing or a curse? | Pacific Beat

Melanesia's resources boom - a blessing or a curse?

Melanesia's resources boom - a blessing or a curse?

Updated 5 February 2013, 12:00 AEST

Melanesia is experiencing a 'resource boom' linked to the rapid expansion of the region's oil, gas, mining and logging sectors.

The boom has led to unprecedented economic growth in Papua New Guinea and Solomon Islands. major new projects are expected in Fiji, and mining projects are central to the economies of West Papua and New Caledonia.

All this means Melanesia's economies are out-performing those of Polynesia, which has traditionally enjoyed comparatively higher economic growth rates.

But is the resource boom actually good for Melanesia ?

That's the topic for a public debate at the Australian National University, which will feature a number of leading academics and researchers in the field, including Professor Satish Chand from the School of Business at the University of NSW.

Presenter: Geraldine Coutts

Speaker: Professor Satish Chand, UNSW School of Business

 

CHAND: Having a resources boom can be a huge benefit to developmental outcomes. But I guess the risks in at least a few cases, the risks may actually outweigh the benefits. But that would be more an exception than the rule.
 
COUTTS: And what could some of those risks be?
 
CHAND: Well a couple, in particular the very process of mining as an example, but also logging produces effluents, and of course many of these are toxic to the environment. Think of the case of Bougainville in the release of toxins into the two rivers. That obviously has costs. But the other is the use of the proceeds from mining or from any resource boom. They generally generate a lot of revenue and therefore they create incentives for what economies call rent-seeking, so corruption both legitimate and illegitimate means of getting access to those revenues.
 
COUTTS: And the resource curse probably needs to be defined more fully, but part of that is that the benefits and the huge wealth regularly don't trickle down to the communities?
 
CHAND: Absolutely right, so nearly every resource boom creates inequality in society, and you would have people who have access to the resources, maybe because they are resource owners, possibly because they live very close to the place where the resources are being extracted, they benefit. While the costs of resource extraction spreads much more widely. Think of communities living downstream from a mine, they pay a price for mining. So any resource boom, logging included, creates this huge inequality both in terms of income but also in terms of access to job opportunities, access to services. So that in itself creates problems in society. 
 
COUTTS: But the access to jobs is something that's been hotly debated already ahead of the resources boom and mining boom in Papua New Guinea for instance, where they're considering fly-in, fly-out, so it won't actually create the jobs that were initially anticipated?
 
CHAND: Yes, many of the resource projects require highly skilled labour. Mining as you probably know Geraldine, is a highly capital intensive industry and it requires skilled workers. And fly-in, fly-out is one means of trying to fulfil the need for skilled workers. But it also raises the challenge for Melanesian governments themselves in trying to prepare the workers for a boom. In most cases a mine actually takes many years to come into production, and it gives the opportunity, the time, for local governments, for domestic governments to train their people. And I think in Melanesia we have largely failed in training the people in preparation for a resource boom.
 
COUTTS: And we often talk and hear and you've touched on it already about corruption that seems to be inevitable in any of these booms. But it is inevitable? Can preparations be made to make sure that the wealth is equally distributed and corruption doesn't take place?
 
CHAND: It is really, it's something that can be avoided. Think of Australia as an example. Australia is benefiting from a resource boom more than any Melanesian country. Perhaps Papua New Guinea would come close to Australia, but my guess is that we don't have the same degree of corruption, the same degree of illegitimate means of trying to get access to the profits, the proceeds from mining, as we do in Melanesia. So the problem of corruption, the problem of trying to get access to resources say by blowing up pipelines and so on in Melanesia is more the result of weak governments and weak governance. By governance I mean weak accountability mechanisms that are present in these places.
 
COUTTS: Health and education, health in particular in Papua New Guinea, is in desperate need of an injection of funds and resources and all the rest of it. Is this something that can actually come from a boom in the mining industry?
 
CHAND: Not in the immediate future largely because many of the mines are exempt from paying taxes. Many of the mines actually provide health and education services at their sites, but if you're looking at access to education and health more broadly in the nation as a whole, then obviously the coffers of the government have to be improved. Many of the mining projects actually would not be paying taxes in the short to medium term. Of course LNG is an exception, which is due to be paying some taxes. But largely the mining projects when they come on-stream they get these tax holidays, so that would not really help in terms of revenues for the government, and thus resources for provision of basic services.
 
COUTTS: Well we'll come back to the original question, the resources boom is it going to be beneficial to Melanesia?
 
CHAND: On the whole yes provided that the damaging effects of mining, both in terms of the physical processes of mining or the toxins that get released from mining or from resource boom, are contained, and also if the social impacts of mining, or the adverse social impacts of mining, are kept under the lid.
 

 

 

 

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