Aust., P.N.G. agree on aid package

Press, 5 August 1985, Page 18

Aust., P.N.G. agree on aid package

NZPA-AAP Port Moresby Australia and Papua New Guinea have reached agreement on a ?Austl.4 billion aid package based on an annual 3 per cent cut for each off the next five years. The cuts are based on last year’s Jackson Report prepared for the Australian Government on overseas aid policy. The Australian Foreign Affairs Minister, Mr Hayden, and his Papua New Guinea counterpart, Mr Giheno, announced the agreement after two days of detailed negotiations. Direct budgetry aid is to be cut 5 per cent a year until 1991, but increased direct project assistance will reduce the over-all cut to the 3 per cent level. When Mr Hayden visited Papua New Guinea in May he said Australia would “probably look with favour” on the Jackson recommendations for gradual and pre-

dictable reduction along the agreed guidelines. Mr Giheno said the Jackson recommendations were too harsh and thought a cut of only 1 per cent was appropriate. But a new element was introduced into negotiations when an Australian Federal Parliamentary sub-commit-tee on aid policy recommended a more rapid rate of decline in aid to Papua New Guinea. Mr Giheno reacted to this with claims that harsh cuts would threaten his country’s economic development and internal stability. Earlier this year, Mr Hayden was unimpressed by the scope of submissions from Papua New Guinea to back its arguments that more than a 1 per cent reduction would not be manageable. However, after talking with Mr Giheno and the Prime Minister, Mr Somare,

Mr Hayden approached the Prime Minister, Mr Hawke, in Australia to pass on Papua New Guinea’s representations. Mr Hayden said he had found Mr Giheno’s representations “forceful and persuasive.” He said it was on this basis, after consultation with Mr Hawke, he had agreed that Australia should move from its position based on the Parliamentary sub-committee’s report. The Parliamentary subcommittee recommended a steadily increasing drop in direct Budget aid culminating with an 8 per cent cut in 1991. Reports that the Australian Cabinet had adopted this line caused alarm in Government circles in Port Moresby. Mr Giheno said he had agreed to the latest Australian proposal because Papua New Guinea considered this to be a fair outcome in the light of economic pressure facing both countries. He emphasised that achieving a rate of decline in Australian aid less than that originally proposed by Australia did not lessen the need for Papua New Guinea to take hard economic decisions in coming years.