One of the enduring strengths of Papua New Guinea is the pragmatism of both people and politicians, unfettered as they are by the fashions in ideologies that momentarily hold sway in other countries. Thus, just as in practice, despite the constitution, no governments have had overt ambitions for outright nationalization of the whole of the enterprise economy, tilts towards privatization have only been effective when the public sector has demonstrably failed to deliver, as has increasingly been the case since 1994. Even then, with the private sector’s performance in Papua New Guinea less than stellar, having provided no net increase in the employment it offers since 1988 (Bank of Papua New Guinea 2003), it has hardly been a role model. Moreover external observers of the failures of Papua New Guinea’s public sector need to remember the much more spectacular debacles engineered by private entrepreneurs in Australia (Bond Corporation in 1988, and in 2001 alone, HIH, OneTel, and Ansett) and most recently in the USA (Waste Management, Sunbeam, and Enron, the last a one-time major shareholder in Papua New Guinea’s upcoming oil refinery). Enron’s debts of K300 billion were 66 times larger than Papua New Guinea’s total external debt in 2001. The World Bank’s (1999) extolling of the benefits of privatization in terms of accountability and transparency also ring hollow when the world’s fifth largest accountancy firm, Arthur Andersen, was directly involved in the frauds surrounding the bankruptcies of Bond, HIH, Waste Management, Sunbeam, and Enron (The Australian 17 January 2002). Even so, those bankruptcies demonstrate the condign punishment by the market of fraud and mismanagement, and in the last analysis it was only the protection of the explicit guarantees by government that protected Papua New Guinea’s public enterprise sector from the same fate (including PNGBC and National Provident Fund in 1999).

Against that background one needs to preserve a degree of caution in recommending any particular ideology-based set of policies for or against public enterprise, and to revert to Jeremy Bentham’s utilitarian calculus: what are the relative costs and benefits of alternative forms of enterprise management on a case by case basis? The promising performance of the CSAs in the later 1980s when their managements were not subject to political appointment is enough to suggest that under the right conditions, including, crucially, freedom from price controls and an appropriate non-government regulatory body, they might have been able to survive as public enterprises.

All the same, the Morauta government deserves considerable credit for being the first to follow through with implementation of its predecessors’ supposed commitment to privatization of Papua New Guinea’s state enterprise sector. Air Niugini, Telikom and Elcom were put on the market; PNGBC and Orogen Minerals had both been sold by April 2002. Prime Minister Morauta’s own lead was impressive, given the context of two army mutinies (2001 and 2002) and student protests (June–July 2001). The Somare government also deserves credit for at least not reversing these privatizations since 2002, despite its electoral rhetoric, and in particular for preserving the independence from political direction of the Bank of Papua New Guinea that was Morauta's most signal achievement.

The main caveats emerging from the narrative in this chapter are, first, that while some trade sales may yield higher returns than floats, as with NBPOL but not perhaps PNGBC, the gains of floats, in terms of transparency and opening up to ownership by the public, are potentially very large, as demonstrated by the Orogen Minerals float in 1996. Secondly, whatever holding or privatization corporations and trusts are in place to manage the privatization process, success will finally depend on the kind of commitment to privatization of the managements of the individual enterprises that was evident at MRDC in 1996 and in PNGBC in 2001, but has yet to be seen anywhere else in Papua New Guinea’s public enterprise sector (apart from the largely autonomous Bank of Papua New Guinea established by the new Central Banking Act 2000).

Finally, we have seen how small Papua New Guinea’s public sector was in 1975, in both its administration and enterprise components; how the latter grew rapidly in the 1970s; and how the sale of PNGBC in 2001 was the first privatization of a wholly-owned public enterprise. The non-enterprise public sector by contrast has not grown at all, apart from education, despite enduring complaints, from the World Bank (in every one of its country reports since 1988) and other aid agencies, that the country suffers from an overblown and burgeoning public service. As demonstrated by Curtin (2000b), Papua New Guinea’s public expenditure expressed as a ratio to its GDP at around 26 per cent is well below the norm in developed countries, and has consistently declined both in real financial terms per head of the population and, more pertinently, in numbers of public servants per head of the population (with, for example, not merely no increases in the ratios for police and defence but actual declines since 1975). This negative growth is perhaps a function of the very slow growth of per capita GDP since independence, and also of the failure of all Papua New Guinea’s governments to address effectively the issue of reform of land tenure first proposed by the Faber Report (Overseas Development Group 1973, see also Curtin 2003). Until conditions are created that enable both the public and the private sectors to grow, Papua New Guinea itself will not fulfil the ideals laid down in its constitution.