The evaluation of any policy process or policy framework must first confront the question of what counts as success or failure, and yet there is no single yardstick against which this evaluation can be made. For example, policies may be said to have failed because they were inherently faulty or because they were poorly implemented. Design faults may explain the failures of implementation if these failures cannot be explained by other factors which the policy makers had no good reason to anticipate. But policies are rarely made or implemented in a vacuum, so it is also necessary to consider the specific nature of these external constraints on the mineral policy process, and each of these may give rise to its own distinctive form of policy failure. Finally, and perhaps most importantly, the stakeholders who participate in any national policy process do not necessarily share the same goals, and what counts as success for one group may count as failure for another.

Papua New Guinea’s condition of ‘mineral dependency’ (or more broadly ‘resource dependency’) is one that has lasted throughout the period since independence. The very fact that Papua New Guinea still has a mineral-dependent economy means that the ambitions of the dominant policy makers at the time of independence have not been realized. The country’s mineral wealth has not been successfully applied to the creation of a more diversified national economy, nor has it served to reduce the country’s dependence on foreign aid. Indeed, for all their problems, the mining and petroleum industries have continued to provide the bulk of the country’s exports for the last twenty-five years, yet the overall rate of economic growth has barely kept pace with the rate of population growth. If this is proof of policy failure, it is not the failure of mineral policy per se, but the failure of a broader national development strategy.

For those who believe that large-scale extractive industry has more costs than benefits for a country like Papua New Guinea, the government’s ability to foster investment in large-scale mining and petroleum projects would itself count as an instance of policy failure, and any activity which has obstructed this form of investment would count as a positive contribution to sustainable development. From this point of view, the Bougainville rebellion and the Ok Tedi litigation are not only proof of the failure of government policy, but also evidence of the success of other stakeholders within the mineral policy process. Yet this can only be judged as a partial success in light of the history of civil conflict in Bougainville following the closure of the Panguna mine, or the fact that the Ok Tedi mine is still operating at a profit and still causing massive environmental damage. Another kind of policy failure may now be evident in the pessimism of some national government officials who already subscribe to the ‘resource curse’ thesis, and therefore conclude that there is no point in making new policies for the mining and petroleum sectors or granting additional resources to those government agencies which are responsible for promoting investment in these sectors.

In one version of this argument, the failure of mineral policy has not been in the promotion of all forms of private investment in extractive industry, but in the emphasis placed on ‘monster’ projects, like Bougainville and Ok Tedi, at the expense of small and medium-scale activities which do not have such major impacts on the physical environment and do not place the same degree of strain on local social and political institutions. This argument applies to the mining sector, rather than the petroleum sector, because Papua New Guinea’s oil and gas reserves are not amenable to small and medium-scale forms of extraction. But even in the mining sector, those who say that ‘small is beautiful’ — or not so ugly — fail to show how a downsized industry can sustain the levels of public expenditure which people are still demanding, and which the government can barely afford to provide with current levels of mineral revenue and foreign debt.

If the measure of good policy is derived from the mission statements of the Departments of Mining and Petroleum, then the overall level of ‘responsible’ private investment in the mining and petroleum sectors is the ultimate test of policy that works. The decline of exploration spending during the 1990s could thus be taken as evidence of policy failure if elements of the mineral policy framework were responsible for this process of disinvestment. If new investment occurs after recent and current changes to the policy framework have been brought into effect, this might seem to confirm the World Bank’s view that good policy is the key which unlocks the process of development. On the other hand, it would also seem to imply that Papua New Guinea still has the capacity to make and implement good policies for the mining and petroleum sectors, even if it can only do so when the Bank is holding its hand. At the time of writing, it is too early to tell which way the barometer will move, but it is also possible that levels of foreign investment have declined, and might yet be restored, for reasons which are either beyond the control of specific government agencies or beyond the reach of the national policy process as a whole. The fickle and cyclical nature of the global markets for different mineral commodities is an external constraint which presents a distinctive challenge for any national policy framework.

The Papua New Guinea Chamber of Mines and Petroleum would sum up the policy failures of the national government under two headings — taxation and security (PNGCMP 2001). From the investor’s point of view, the government has failed to understand the connection between these two issues by imposing additional taxes, or constantly changing the fiscal regime, in a political, economic and physical environment whose insecurity already adds to the indirect costs of investment and production. The national government’s failure to apply its own share of mineral revenues to a broader national process of economic and social development has only compounded this problem, because it has contributed to the growing demand for a greater share of these revenues to be distributed to the provinces, districts or communities which host the large-scale resource projects from which these revenues are derived. This is often expressed as a demand for local people to be compensated for the social and environmental impact of these mining operations. But if the national share of mineral wealth has so far failed to contribute to a broader national process of social and economic development, there is no obvious reason to believe that a bigger local share of mineral wealth will contribute to a broader local process of economic and social development. If anything, the problem of dependency is more acute at the local level than it is at the national level. The more that local people come to depend on a single mining or petroleum project for their incomes and general welfare, the more they are likely to lose when the process of extraction comes to an end.

By contrast with the forestry sector, we cannot simply say that Papua New Guinea’s mineral development policies have failed because developers have failed to comply with them or because the government has lacked the capacity to make them do so. Although the industry has frequently complained about the additional surplus costs which the government has imposed upon it, there has also been a recognition of the need to incur such additional costs, even beyond the level required by national government policy, as the price of securing local political support for its operations. At the same time, the industry has been held accountable for its compliance with government policy through the scrutiny of its own shareholders, by the financial institutions on which it is partially dependent, and by the ‘civil societies’ of the developed world where it is domiciled (Filer 2002). In these respects, it is quite unlike the logging industry in Papua New Guinea, which is dominated by a small group of family-owned companies domiciled in Malaysia.

Some critics have argued that the Ok Tedi court case and the Eighth Supplemental Agreement demonstrated the inability of the national government to regulate an industry in which it had a vested interest, and this contradiction in the role of government was a kind of policy failure in its own right. But if we consider the whole history of debate about the management of Ok Tedi’s waste materials, it is clear that the government has kept its own counsel on the merits of the ‘trade-off’ between economic benefits and environmental costs, and the only obvious evidence of policy failure here would have to be found in a contradiction between the Ok Tedi agreements and the national constitution. And once we look at the bigger picture of relationships between the government and the mining industry, it would be hard to explain the howls of protest with which the industry has greeted many of the government’s mineral policy reforms unless the industry is playing a very elaborate double game.

Those critics who find evidence of policy failure in the state’s subordination to international capital, or in the contradiction between the government’s twin roles as shareholder and regulator in the mining and petroleum sectors, also tend to overlook the deepening divide between the central agencies and the line agencies responsible for various aspects of the mineral policy framework. The Departments of Mining and Petroleum have indeed been driven to defend their respective industries, and to collaborate more closely with the Chamber of Mines and Petroleum, because the rest of the government has either ignored their concerns or made new policy decisions which only add more clouds to a difficult investment climate. In the period from 1974 to 1992, there were policy brokers on both sides of the divide who were able to negotiate a ‘whole-of-government’ approach to mineral development policy, even while politicians were deviating from the path of righteousness. It may be true that the exploration boom of the 1980s induced a sense of complacency that was rudely interrupted by the outbreak of the Bougainville rebellion, but the simultaneous invention of the Development Forum demonstrated their collective capacity for adaptive management of major policy issues, and has been applauded as a ground-breaking measure by the global policy community (MMSD 2002, 211). What should have followed was a clear articulation of the principles to be applied to the internal distribution and management of the government’s mineral revenues, but what happened instead was a lengthy political bunfight over the development of the Lihir gold mine and the parallel design of a new organic law which actually undermined the existing mineral policy framework.

If multinational mining and petroleum companies have their own reasons for implementing national government policy, or being seen to do so, this obviously lightens the load placed on the government’s own regulators. But it should not blind us to the real decline in the capacity of the relevant line agencies to accomplish any of their tasks. Like many other government departments, those responsible for promoting and regulating the mining and petroleum industries now operate with budgets whose real value has fallen by more than two thirds in the space of a decade, and whose staffing levels have declined accordingly. Most of the national and expatriate government officials who were involved in the transformation of the mineral policy regime under the Namaliu government or the negotiation of the Lihir project agreements under the Chan government have since defected to the private sector. Their place has been taken by donor-funded consultants who can certainly help to design new policies, but cannot readily create the conditions under which they will be jointly implemented by a number of different government agencies. It is somewhat ironic that the two government agencies which are responsible for promoting the industries that generate as much as half of the government’s domestic revenues should now be dependent on loans and grants from donor agencies in order to conduct their business.