Under the arrangements introduced in 1995, the governor, who is head of the provincial government and chairs the provincial assembly, is normally the member of the national parliament representing the provincial electorate. If the provincial member accepts an executive position in government, or becomes leader or deputy leader of the opposition or speaker or deputy speaker of the National Parliament he/she must be replaced by another MP.^[13] The deputy governor is elected from among the representatives of the local-level governments. The governor is constitutionally responsible to the minister for provincial and local-level governments.

The former ministerial system at provincial level was replaced by a committee system. The provincial executive council comprises the governor and deputy governor and the chairpersons of the committees, not exceeding a third of the membership of the assembly. Since the governor appoints the committee chairs, this provision gives the governor considerable authority.

Administratively, provincial departments were abolished under the OLPGLLG, their operations coming under the relevant national departments through a provincial administrator, who is the chief executive officer of the provincial government and ‘the administrative head of the staff in the province’ (Ss.73–74). In fact, however, the shift from provincial departments to provincial administrations made little difference to the way things were done at the provincial level (except there was no longer an allocation to provincial departments in the national budget) and the role of the provincial administrator vis-à-vis the heads of national departments in Port Moresby has been ambiguous. The OLPGLLG provides that the provincial administrator be chosen by the National Executive Council from a list of persons nominated by the provincial executive council. In practice, however, the appointment of provincial administrator has been a subject of controversy in several provinces since 1995. In Southern Highlands Province at one stage there were three provincial administrators, appointed under different governors, contesting the position (and all drawing salaries), and this situation was more or less replicated at district level. At least one other province, Enga, has also for a time had more than one provincial administrator.

The framers of the OLPGLLG foresaw a decentralization of administration from Waigani to the provinces and from provincial capitals to the districts. In fact, however, the provisions of the OLPGLLG have been a source of some confusion: although the provincial administrator ‘shall maintain overall supervision and direction’ over all public servants in the province (excluding law enforcement agencies), and ‘shall co-ordinate and monitor the roles and functions’ of the national departments and agencies (S.74[1][d],[e]), it was not initially clear how this authority related to the chain of command within national departments and agencies, nor what control the provincial administrator exercised over district administrators. For example, under the Public Finance (Management) Act the provincial administrator is responsible for the accountability of the provincial administration, but has no formal power to direct staff responsible for keeping accounts. This has been a particular source of contention in the Health sector. Responsibility for rural health services (a sub-national function) rests with the provincial administrator, who is advised by a provincial health board (of which he is the chair); a provincial health adviser, appointed by a panel chaired by the provincial administrator and sometimes including a representative of the national Department of Health, sits on the board. The provincial health adviser has local responsibility for hospitals (a national function) but ultimate responsibility rests with the Department of Health. He/she reports to the provincial administrator; attempts by the national Department of Health to institute a system of dual reporting have not succeeded. At the local level, community health workers report to the district administrator, rather than the provincial health adviser. It has been argued that these structural arrangements do not make for effective delivery of Health services (see Thomason and Kase in this volume).

Under the OLPGLLG provinces retained their primary powers, including financial powers, but concurrent powers reverted to the national government. Local-level governments were also given significant law-making powers, covering such subjects as labour and employment, self-help schools (excluding curriculum), dispute settlement, local environment, and local aidposts (see Ss.42–45). However, the OLPGLLG also provided that in the event of any inconsistency between provincial and local-level laws and national laws, the latter will prevail. There has, however, been confusion about which level of government is responsible for what (see below).

A significant amendment to the OLPGLLG (S.33A) in 1996 provided for the establishment of a joint provincial planning and budget priorities committee (JPPBPC) and joint district planning and budget priorities committees (JDPBPCs) in each province. Each JDPBPC consists of the MP representing the open electorate (as chair), the provincial MP, the heads of the local-level governments in the district, and up to three other members appointed by the open MP in consultation with heads of the district’s local-level governments. The role of the JDPBPCs is to oversee and coordinate district planning (including a rolling five-year development plan) and budget priorities ‘for consideration by’ the provincial and national governments; to determine and control budget priorities for local-level governments, and to approve local-level government budgets. The JPPBPC has similar functions at the provincial level. In some districts (especially those around the provincial capital) the JDPBPCs have played an effective role; in others they have met infrequently, and often outside the district (in several cases in Port Moresby). A critical factor in this is the role played by the open MP (see below). Apart from the question of whether the JPPBPC/JDPBPCs work effectively, there is an inherent problem in these arrangements in that such ‘bottom-up’ planning means that provincial priorities are not necessarily consistent with national priorities laid down in the MTDS and embodied in the policies of national departments.

In presenting the new legislation in 1995, the CRC claimed that ‘the reform is not “centralizing” powers as claimed by critics. This reform is in fact decentralizing powers further to the Local Level Governments’. As noted above, however, some commentators were more sceptical. As one assessment in 1997 suggested:

Local-level governments (LLGs) are defined as urban authorities or councils, community governments, local government councils, ‘traditional form(s) of governmental structure’, or some combination of these (S.26), though outside of the provincial capital most provinces have retained the long-established local government council structure. The OLPGLLG removed from provincial governments the power to make laws about local-level government. A ‘normal maximum’ of three rural local-level governments was set for each district.^[14] Within each LLG is a structure of wards, around which have developed ward committees (not provided for in the OLPGLLG).

The administrative functions allocated to local-level governments are spelled out in the Local-level Governments Administration Act of 1997. They include the preparation of a rolling five-year development plan and an annual plan and budget, construction and maintenance of infrastructure for which LLGs are responsible, initiating and implementing programs for youth and women, and organizing forums to discuss renewable natural resources.

Until 2007, in most districts, little has been left of the small amount of revenue received by LLGs after allowances (fixed by the national Salaries and Remuneration Commission) have been paid to councillors. In 2007 this was addressed by replacing staffing grants with goods and services grants. In an attempt to re-mobilize local-level governments and give them a source of locally-generated revenue there has been a move to reintroduce head taxes. ^[15]The national government passed enabling legislation in 2004 and several local-level governments have passed the necessary legislation, but only a few have actually begun revenue collection and it is likely that many will never do so.

The OLPG of 1977 contained provision for the establishment of special purpose authorities at local level. Four such authorities were then already in existence.^[16] In 1989 the Porgera Development Authority was created, as part of the arrangements negotiated for the Porgera gold mine in Enga Province, and five years later the Nimamar Community Government was transformed into the Nimamar Development Authority during negotiations over the gold mine on Lihir, New Ireland.

The Local-level Governments Administration Act of 1997 provides for the creation, on a recommendation of the minister for Inter-Governmental Affairs and advice of the NEC, of special purpose authorities to assist in the implementation of functions of one or more local-level governments. Special purpose authorities have been seen as a means of devolving powers to locally-based corporate bodies whose operations are ‘at arms length’ from local-level governments (Filer 2004, 3). Their functions may vary; those of the Porgera Development Authority, for example, include the control, management and administration of the Porgera District, assistance to local government councils in carrying out their functions in the district, receiving and distributing royalties from the provincial government, maintaining the local airstrip, advising on liquor licensing, and assisting the provincial town planning board. Since 1995 several new authorities have been created or proposed, notably for Koiari (which covers the source of Port Moresby’s water and hydro-electricity supply), Kikori, Kutubu and Hides (the last three associated with gas and petroleum resource projects). In addition an Ok Tedi Development Foundation was established in 2001 by Ok Tedi Mining Ltd (OTML) to deliver a range of services around the Ok Tedi mine in Western (Fly River) Province and PNG Sustainable Development Ltd was set up to receive income from the Ok Tedi mining operation and channel the funds to sustainable development projects in and beyond the province. While there have been attempts to use special authorities ‘as “fronts” for the misappropriation of government funds’ (ibid. 5), there has been some support for the special purpose authority model, specifically in areas where major resource projects generate substantial revenue, and create special problems of governance. (For a more detailed discussion of this topic see Filer 2004.)

To supplement their internal revenue sources, and the payment of proceeds from specific tax revenues collected by the national government (principally now the GST), provision was made for the provinces to receive six forms of grant from the national government: a provincial and local-level administration grant, a provincial infrastructure development grant, and a local-level government and village services grant (all based variously on population and land and sea area); a town and urban services grant (based on urban population); a provincial and local-level staffing grant (related to provincial administration and teaching service salaries, but administered through the national payroll system in Port Moresby), and a derivation grant (based on the export value of commodities produced in the province) and special support grants provided for in natural resource agreements. There was also provision for conditional complementary support grants to provincial and local-level governments ‘to support any specific or contingency need’, but this provision has not been used. In 1996, associated with the creation of Joint Provincial and District Planning and Budgetary Priorities Committees, a provincial and district support grant was added to the funding package. In 1998 the OLPGLLG was again amended; the minimum level of the provincial/district support grant was set at K0.5 million per electorate, half of which was to be paid to the JP/DPBPC to fund rural action and urban rehabilitation programs,^[17] and half to the MP in the electorate, to be allocated at his/her discretion within district support grant guidelines (in some cases, MPs leave the allocation of the entire district support grant to the JDPBPC but in most cases MPs have retained control over the discretionary element, and this has been a continuing source of controversy).^[18] (For an assessment of the electoral development / district support grant system see Ketan 2007).

The OLPGLLG also provided for the creation of an independent National Economic and Fiscal Commission (NEFC) with broad fiscal and economic functions, including oversight of provincial finances — a successor to the long moribund National Fiscal Commission established under the OLPG of 1977. In fact, it was not until 1998 that the NEFC was established, and then to ratify the Skate government’s decision to pay the provincial and local-level governments amounts less than were prescribed under the grant formulae. Subsequently, the NEFC became the leading force in pushing for a review of the intergovernmental financial arrangements. The NEFC identified a number of problems. These include: the inability of the national government, in its present fiscal circumstances, to meet the requirements of the OLPGLLG; some uncertainties about fiscal responsibilities (‘We do not even know clearly exactly what each level of government is responsible for paying for’^)[19]; wide disparities between provinces and districts in the costs of providing services; the fact that national priorities are not always given priority in provincial budget allocations; and the fact that ‘only a small proportion of provincial funding is going into goods and services’. ^[20]

Under the new decentralization arrangements the Premiers’ Council lapsed, though a provincial governors conference has met annually (without a statutory mandate) and there is an annual meeting of provincial administrators. As noted, the moribund NFC was replaced by the NEFC. However, a new institution, the National Monitoring Authority (NMA), formally titled the Provincial and Local-level Service Monitoring Authority (PLLSMA),^[21] was established under the OLPGLLG with a range of functions, including:

The NMA/PLLSMA comprises heads of the major sectoral departments and the NEFC, and is chaired by the secretary, Department of Provincial Government and Local-level Government Affairs (DPLGA). Several meetings of the NMA were held in the latter part of the 1990s, with little concrete output; thereafter it lapsed until it was re-activated in 2004 (see Barter 2004, 134–135).

The OLPGLLG effectively removed the national government’s authority to suspend provincial and local-level governments, ‘except where there is a war or national emergency or where a Provincial or Local-level Government undermines or tries to undermine the authority of the National Government’. However, the national government’s powers to withdraw functions and finances from provincial and local-level governments (Ss.51–57), though subject to referral to an independent national investigation committee set up under the OLPGLLG, appeared to remain substantial. During the latter part of the 1990s four highlands provinces had powers withdrawn. In 2000 the governor of the Southern Highlands Province appealed against the withdrawal of his government’s powers by the national government, on constitutional grounds, and his appeal was upheld. Commenting on this in 2004, Barter said:

The constitution has since been amended (as part of a package to retrospectively authorize the collection of GST by the national government) to broaden the national government’s powers, but the new provisions have not been tested, and further draft legislative amendments submitted to a parliamentary committee had not been taken up at the end of 2006. Meanwhile, the national government appears to be powerless to remove a provincial governor.