Although some non-elected interim provincial governments put off elections for as long as they could, by mid 1980 all nineteen provincial governments had elected assemblies. All broadly followed the essentially Westminster model of the national government, though in four provinces^[3] the head of government (the premier) was directly elected by the people. Most provincial constitutions provided for up to three appointed members of the assembly and some used this provision to appoint women and church representatives. In 1981 the OLPG was amended to make members of the National Parliament non-voting ex officio members of their provincial assemblies (though in most cases MPs seldom took the opportunity to attend provincial assembly meetings). Following the Westminster model, provincial executive councils (PECs) were appointed by the premier from the floor of the assembly (Manus was the only province to take up a CPC suggestion that provincial assemblies might consider a parliamentary committee system), and in the general absence of political party systems, large PECs (in Eastern Highlands and East New Britain at times more than half the assembly) were used as a means of discouraging votes of no confidence in the government.

Having decided against separate national and provincial administrative services, arrangements were made in the OPLG to assign to provincial governments control and direction of public servants and teachers carrying out transferred functions. Recognizing that Bougainville and East New Britain had already appointed some provincial staff, however, allowance was made for a locally-appointed ‘provincial secretariat’ of up to six people, headed by a ‘provincial secretary’. Initially, ‘in part to shield public servants from political pressure’ (May and Regan 1997, 35), personnel matters concerning assigned national public servants were delegated to an ‘administrative secretary’ appointed by joint approval of the provincial and national governments. Both secretaries were answerable to the PEC. Although provision was made in the OLPGF to deal with the apparent ambiguity of this administrative structure, it was a source of some confusion and potential tension, and in the early 1980s, in all but two provinces, the ‘provincial secretaries’ were absorbed into newly-created departments of the provinces and the ‘administrative secretaries’, confusingly renamed provincial secretaries, were placed at the top of a single line of authority.^[4]

With the creation of departments of the provinces, a line of authority was established back to the national Public Services Commission. Confusion over the respective roles of the provincial and national governments with respect to personnel management continued, however, and in 1984 the Morobe provincial government challenged the arrangements (following dispute over an appointment by the national government) and the Supreme Court ruled that the departments of the provinces were contrary to the OLPG. Some provinces took the opportunity to establish new administrative structures, though most simply replicated the old departmental structures. By the early 1990s most provinces had also established provincial management teams (PMTs), chaired by the provincial administrator and comprising the heads of the major sectoral divisions, and in many cases district management teams (Peasah 1994, 275–278).

By the latter part of the 1980s there were increasing complaints of politicization of appointments by provincial governments — including appointments of some provincial secretaries. On the other hand, the performance of national public servants responsible for service delivery at provincial level frequently left a lot to be desired.

The arrangements of the OLPG for division of legislative powers between the provincial and national governments were complex. A few areas were preserved to the national government, and a few to provincial governments, but most areas of potential legislation were left open to both levels of government, in the belief that such ‘flexibility’ would allow the system to accommodate the evolution of decentralization. Within this shared field, some subjects were listed as ‘primarily provincial’, in which provincial laws would take precedent over national laws, and some were placed in an ‘unoccupied field’ (which included defence and national security), in which national laws took precedence, but most were listed as ‘concurrent’, though here also national laws prevailed in the case of inconsistent legislation. As noted above, however, the essentially unitary nature of the system was reflected in the National Parliament’s ultimate power to disallow a provincial law if it considered this to be ‘in the public interest’. The national government used this authority only once: to prevent the Enga provincial government from extending the term of its provincial assembly in 1990.

In fact, after an initial burst of activity to pass basic implementing legislation (mostly drafted by national government officers), most provincial governments were fairly inactive legislatively, several doing no more than pass their annual appropriation acts. One of the reasons for this was that most of the activities of provincial governments were transferred to them by the national government and exercised under national legislation — an arrangement which, as Regan observes, ‘largely ignored the spirit — and arguably the letter — of the OLPG and tended to give the national government greater control over provincial governments than was intended by the OLPG’ (May and Regan 1997, 33).

There were, however, a few notable instances of provincial legislative initiatives, including those of the East Sepik provincial government in relation to customary land registration, Manus in relation to marine and forest resources management, and New Ireland in relation to compensation payments.

Consistent with the recommendations of the CPC, the OLPG gave responsibility for local government to the provincial governments — despite the reservations expressed in the 1974 White Paper (see above). In thirteen provinces, provincial governments simply passed new legislation to perpetuate the existing structure of local governments; in two provinces councils continued to operate under national legislation, while four replaced local government councils by community governments, following a model already introduced in Bougainville. During the 1980s several provinces moved to replace councils in urban centres by appointed statutory authorities.

Already by 1977 local government councils were in decline in many parts of the country, with most facing resistance to the payment of council head taxes and participation in council activities. Local-level government funding was said to be under review in 1981, but nothing seems to have come of this. By the early 1990s, deprived of funding and human resources, local governments in most provinces were barely functioning. Regan observed that ‘in the…struggle for power, resources and prestige, local government has been perhaps the biggest loser under the provincial government system’ (May and Regan 1997, 28). In 1991 a committee of the Premiers’ Council (responding to the report of the Hesingut Committee — see below) recommended that local governments be represented in provincial assemblies (up to 25 per cent of elected members) and be guaranteed 10–20 per cent of national government transfers to provincial governments, but no action was taken at the time.

Intergovernmental financial relations pose problems for most federal-type systems, and Papua New Guinea has been no exception. The financial arrangements of the OLPG contained several elements.

A minimum unconditional grant (MUG) was intended to ensure that each province had the basic funding necessary to carry out the functions transferred to the provinces in 1977; it was based on the level of expenditure by the national government on the transferred functions in the year prior to the introduction of provincial government, adjusted annually for movements in the consumer price index or in government revenue, whichever was smaller, less the salary cost of public servants assigned to the province by the national government (which were paid directly by the national government). From the outset, there were problems with the MUG. For one, in 1978 it was decided that provinces which had not attained ‘full financial responsibility’ (FFR) would not receive the full MUG.^[6] The eleven provinces which did not achieve FFR received most of their funding directly through the national budget. This arrangement probably contravened the provisions of the OLPG, but the provinces without FFR did not object because the funding they received was greater than they would have received under the MUG formula. Secondly, the formula took no account of population increase or rising costs of carrying out the transferred functions — particularly rising salary levels (which were determined by a national tribunal, and were therefore beyond provincial control); as a result, the salary deductions taken from the MUGs of the provinces with FFR took a progressively larger part of the MUG (rising, on average, from 47 per cent in 1978 to 72 per cent in 1988).

A second category of grant, additional unconditional grants (AUGs), was initially intended to be the principal vehicle for equalization amongst provinces. It was envisaged that the AUGs would be of a significant amount, allocated at the discretion of the national government on the advice of the National Fiscal Commission (see below). In fact, the amount paid in AUGs was small, and after 1984 none were paid, funds being diverted instead to the national government’s five-year rolling plans for non-recurrent expenditure (the National Public Expenditure Plan (NPEP) to 1985 and the Public Investment Program (PIP) from 1987). The NPEP did include a Less Developed Areas Program, through which several provinces with integrated rural development programs (East Sepik, Southern Highlands, Enga and Milne Bay) received funding, but only limited amounts of NPEP/PIP funding were directed to the provinces — less than 20 per cent in most years — the rest being allocated to projects of national government agencies. Analysis of NPEP expenditure suggested no evidence of provincial equalization (see May 1999, 131); indeed the process of competitive bidding for funds was very likely to disadvantage the less developed provinces, in which administrative capacity was generally also less developed. The need for an equalization element in financial transfers was argued before the review committee in 1981 (May 1981, 26–29).

A third source of provincial funding was a derivation grant, calculated on the export value of production originating in the province, less any royalties payable to the provincial government. This was designed essentially to placate the wealthier, or resource-rich, provinces, notably Bougainville — though it was rationalized as also giving provinces an incentive to encourage economic development. In addition, from 1990, a special support grant was introduced for those provinces hosting a major mining or petroleum project, based on the export value of minerals and petroleum production in the province. A fourth category of grant, conditional grants, for purposes agreed between the national and provincial governments, was used only sparingly, to finance town sanitary services in rural centres.

The proceeds of certain national government taxes were also transferred to provinces, the most important initially being royalties, of which the main recipients were North Solomons and Western provinces, and to a lesser extent Milne Bay, Enga, Southern Highlands, and New Ireland. Subsequently, the national government took over responsibility for the collection of retail sales/value-added tax, returning proceeds to provinces on the basis of derivation. The OLPG reserved certain revenue sources for the exclusive use of provinces, but internal revenue was a relatively minor source of funding, ranging in 1988 from 23 per cent in Bougainville to 2 per cent in the Southern Highlands. From 1978 (when the national government provided a grant and a K100,000 interest-free loan for the establishment of provincial ‘development corporations’) all provinces had business arms, but with poor management and frequent political interference in their operations, by the early 1980s most were running at a loss and few survived.

As early as 1979 there were demands for a review of intergovernmental fiscal arrangements (prompted primarily by the problems associated with the MUG arrangements), and in 1980 the Department of Finance and the Premiers’ Council separately initiated review processes. Consultants’ reports were commissioned and submitted in 1981 to a Committee to Review the Financial Provisions of the Organic Law on Provincial government (Chelliah 1981; May 1981); a Premiers’ Council report was submitted the following year. This led further to the establishment of a specialist committee which reported to the Premiers’ Council conference in 1984,^[7] but nothing was done to implement the recommendations of the committee until 1988. Amendments to the OLPG were drafted and introduced into parliament in 1990, but they lapsed when parliament rose in 1992 without having debated them.

Given the emphasis on the flexibility of the decentralization introduced in 1977, the OLPG sought to encourage intergovernmental consultation, and several issues were made non-justiciable. Reporting in 1980, however, the General Constitutional Commission (GCC) expressed the view that, ‘Although there has been some consultation between National Government and Provincial Governments the extent to which this has been carried out has been extremely poor’ (GCC 1980, 31).

The main institutional elements to achieve this were a Premiers’ Council and a National Fiscal Commission. The Premiers’ Council, comprising provincial premiers and the prime minister and national ministers for Finance and Provincial Affairs, was required to meet at least once per year, and seldom met more often. It provided a useful forum for discussion of provincial concerns and occasionally played a role in helping resolve issues of contention between the two levels of government, but there was little follow-through on Premiers’ Council resolutions^[8] and it scarcely succeeded in achieving its stated objective of avoiding legal proceedings between governments (OPG S.84), which occurred with increasing frequency from the mid 1980s. By the early 1980s informal meetings of regional premiers (Islands, Highlands, Momase or North Coast and Papua or South Coast) were also taking place.^[9]

The National Fiscal Commission (NFC) was intended to be an independent expert commission, along the lines of fiscal commissions in several federations, with the principal tasks of advising the national government on the distribution of additional unconditional grants (see above), and helping to resolve disputes over provincial taxes and other fiscal matters. In fact, however, the NFC as constituted was more eminent than expert, and it was generally perceived by provinces as being ‘in the pocket’ of the Finance Department (May 1981, 41–43). After 1985 it effectively lapsed.

The constitution and the OLPG of 1977 included complex provisions to safeguard the autonomy of the provincial governments. Already in 1979, however, the then minister for Decentralisation, John Momis, was pressing for amendments to make it easier to suspend provincial governments. This was eventually done in 1983 and the first suspension took place the following year. By 1995 all but five provinces had been suspended at least once, mostly on the ground of financial mismanagement^[10] — though in several instances political animosities between provincial politicians and national MPs also seem to have come into play (May and Regan 1997; Barter 2004), and apart from a few prosecutions little attempt was ever made to address the problems that led to suspension.

The decentralization of 1977 had a difficult birth, and the provincial government system continued to generate controversy. Some of the early critics of provincial government remained convinced that the transfer of functions to the provinces was a mistake; local government councillors, who became increasingly marginalized in most provinces, often supported calls for change in the system; and, in particular, backbenchers in the National Parliament, who frequently saw provincial politicians as a threat to their political support bases, began looking at ways of reasserting their authority (the 1981 amendment to the OLPG which made national MPs ex officio members of provincial assemblies, was in large part a reflection of this,^[11] as was the 1983 amendment which made it easier to suspend provincial governments). In addition, Regan argues, ‘there was not (in the early period of provincial government) the mass mobilization around the new provincial governments that had been anticipated by the CPC’, except perhaps in Bougainville and East New Britain (May and Regan 1997, 61). Unfulfilled expectations at provincial and local level, complaints about the high cost of the provincial government system,^[12] evidence of mismanagement and corruption, and the general excesses of some provincial politicians, all combined to generate demands for change.

Administratively, the creation of departments of the provinces, which brought personnel assigned to provinces back under the control of the national Public Services Commission, the ‘full financial responsibility’ arrangements which saw the national Department of Finance retain control of funds intended to go to provinces, and the introduction of the NPEP/PIP for the allocation of non-recurrent spending, combined with the demise of the ‘additional unconditional grants’ (see above), were all designed to limit, if not to actually reverse, the process of decentralization. Elsewhere, in the departments of Health, Education, Primary Industry, and Forests, national agencies continued to exercise control over provincial activities through a variety of administrative procedures (see, for example, May and Regan 1997, 63–64 et passim), often with the passive acceptance of provincial governments.

In the early 1980s, opposition to provincial government became more overt. After being returned as prime minister in 1982, Somare initiated a move to replace the OLPG by an ordinary act of parliament, telling a Premiers’ Council conference the following year that if there were a parliamentary vote on the abolition of provincial government, the vast majority of MPs would support it. The proposed legislative change was strongly opposed by the premiers of the Islands Region and some other prominent political leaders, and was not pursued. However, in 1984 Somare raised the issue again, this time proposing a referendum on the future of provincial government. Again, he was opposed by leaders in the Islands Region, who this time threatened to secede, and the proposal was dropped (see May 1999). However a parliamentary select committee, chaired by Anthony Siaguru, was set up to look at the working of the provincial government system. In 1985 Somare lost a parliamentary vote of no confidence and was succeeded by Paias Wingti, who — though himself no supporter of provincial government — terminated the work of the Siaguru committee. Wingti himself lost office in 1987, but told the press that if returned he would move to abolish the provincial government system (Papua New Guinea Post-Courier 4 November 1988).

The following year, 1988, saw the beginnings of the conflict on Bougainville, and in 1990 its declaration of independence. Regan has argued that the demise of the Bougainville provincial government — ‘long held out as the model of what was possible under the system’ and a potent force opposing the critics of provincial government — encouraged moves to abolish the system (May and Regan 1997, 70). Following a further change of government in 1988, in 1990 another parliamentary select committee on provincial government was set up under the chairmanship of Morobe MP Henu Hesingut. The Hesingut Committee left no doubt about its antipathy to provincial governments: its final recommendation was for the abolition of elected provincial governments and their replacement by provincial bodies composed of heads of local-level governments, which were to be brought under national government control (National Parliament 1990).

In reaction to this, the Premiers’ Council established a Premiers Sub-committee on Provincial Government Review, essentially to counter what the premiers saw as the Hesingut Committee’s ‘consistently expressed…negative view of the provincial government system’ (National Premiers Council 1990, 2). The sub-committee complained of the lack of response to resolutions of the Premiers’ Council (see above), and argued that increased national control of public servants in the provinces had left them unable to efficiently manage staffing matters and had restricted their ability to take quick and decisive disciplinary action. It accused the Hesingut Committee of unwillingness to hear views in support of provincial government, and failure to consider previous reports on the system, concluding, ‘It is the belief of the Premiers’ Council that the real mission of the Select Committee is to lay foundations for the abolition of the provincial government system rather than conduct a constructive review’ (ibid. 15).

Also between the preliminary and final reports of the Hesingut Committee, a private member’s bill was introduced into parliament seeking the creation of district development authorities to take over most of the functions of provincial governments. The bill proposed district coordinating committees, chaired by the open MP (districts being the administrative level below provinces, and broadly corresponding with open national electorates) to oversee development projects at district level. Although the bill lapsed, an outcome of the parliamentary debate was the passage of the Electoral Development Authorities Act, 1992 which gave MPs a role in the distribution of funds in their electorates — what became known as ‘slush funds’ (see below).

In 1992 Paias Wingti again became prime minister, and announced his intention of overhauling the provincial government system. Within weeks of taking office, his government introduced a Village Services Programme, which Village Services and Provincial Affairs Minister John Nilkare described as ‘the most fundamental policy shift in our national history’ (Papua New Guinea Post-Courier 14 August 1992, 24–25. Also see The Times of Papua New Guinea 12 November 1992, 32–33 and Department of Information and Communication 1993, 41–42). It was designed to empower some 240 community governments through a structure of district centres and community councils linking the national government with village groups, largely bypassing provincial governments.

In a subsequent statement, Prime Minister Wingti said he would reduce the number of provincial politicians and give greater power to national MPs; he described the provincial government system as costly and divisive, and marred by gross mismanagement and corruption. In October 1992, the National Executive Council agreed to the abolition of the system of elected provincial governments established in 1977, and legislation was drafted for amendment of the constitution to enable the repeal of the OLPG. The then opposition leader, Sir Michael Somare, endorsed the decision.

Many welcomed the Wingti government’s initiatives, but there was strong opposition from within provincial governments, and in the New Guinea Islands region there were renewed threats of secession and talk of creating a Federated Melanesian Republic if demands for greater autonomy were not forthcoming. In the face of this opposition, (as well as threatening to suspend the Islands provinces and prosecute their leaders) Wingti set up a Bi-partisan Parliamentary Select Committee on Provincial Government, chaired by New Ireland MP Ben Micah. After public consultations, the Bi-partisan Committee presented a final report in August 1993 which recommended a comprehensive restructuring of the provincial government system. The NEC endorsed the committee’s report and created a Constitutional Review Commission (CRC) to implement its recommendations.

Draft legislation was tabled in the National Parliament early in 1994. The legislation proposed to do away with the elected provincial assemblies, replacing them with provincial governments comprising the national MPs from the province and heads of local-level governments, with provision also for a small number of traditional chiefs and appointed members (including a woman representative). It sought to incorporate districts in the new structure and to empower local-level governments. In explaining the general thrust of the proposed new organic law, the CRC described it as one ‘of greater decentralisation…in that more powers are decentralised further to local level governments’ (quoted from a CRC brief published in The Times of Papua New Guinea 7 April 1994, 31–42). Others, however, saw it as a re-centralization, in that it did away with elected provincial members and enhanced the role of national MPs. Continuing opposition from the provinces and some national MPs resulted in amendments to the draft legislation, including its financial provisions, in favour of the provincial governments.

The amended legislation still did not have an easy passage, with continuing threats of secession by the Island premiers, and the acknowledged father of provincial government in Papua New Guinea, John Momis, predicting that the new legislation would create ‘an administrative nightmare’; not only was the local government system ‘almost dead in most provinces’, he said, but the new arrangements would ‘make many provincial governments tools in national level conflict on a level and to a degree of intensity never before imagined’ (Papua New Guinea Post-Courier 4 April 1995). Nevertheless, in June 1995 the new Organic Law on Provincial Governments and Local-Level Governments (OLPGLLG) was finally passed. In recognition of the special circumstances on Bougainville, the recently established Bougainville Transitional Government was initially exempted from the provisions of the OLPGLLG. Special arrangements were also made for the National Capital District. Sir Julius Chan, who had replaced Wingti as prime minister in 1994, welcomed the new arrangements, claiming that Papua New Guinea had been freed from the burden of a provincial government system that had handicapped the country for the best part of twenty years.

Several cabinet members, including Sir Michael Somare, opposed the passage of the OLPGLLG and as a result were dropped from the cabinet; a by-product of this was a split in the Pangu Pati which led to the emergence, under Somare’s leadership, of the National Alliance.