Canberra, 2 February 1966
Papua and New Guinea—constitutional development
[matter omitted]3
Comment
One or two points in the Minister’s submission cause us some concern. It is noted that in paragraphs 4 and 5 of the Annex (which appear to be the basis for the ‘principles’ outlined on page 7 of the Submission) it is suggested that ‘as a first step, Parliamentary Secretaries should be appointed to a limited number of departments, viz. those concerned with providing social or essential services for the people’ and each Parliamentary Secretary ‘would direct the overall activities and make day-to-day decisions of his Department’.
Under such an arrangement it appears that the Parliamentary Secretaries would have the political responsibility for running the social service group of departments without having any matching responsibility towards the more unpopular task of raising revenues.
Our concern on this point is further increased by the wording of paragraph 13 of the Annex. Frankly, our impression is that the Minister envisages that to gain the support of the elected members for a development programme, certain concessions may have to be made in the social sector. We recall that the Minister for Territories told Cabinet (Submission No. 724, 8th April, 1965)4 that it may be difficult to confine social expenditure to the limits recommended by the World Bank Mission and he recommended that ‘expansion of activities that are not directly economic should not be restricted to the extreme where our fundamental objectives in the Territory would be prejudiced’.
We have also noted (paragraph 12 of the Annex) it is proposed that the draft budget estimates for the Territory would be submitted to the Administrator’s Council for advice before the estimates were passed to the Minister for Territories for his approval and ultimate transmission to the Government for determination of the grant. Cabinet did not approve a recommendation by the Minister for Territories last year that the Northern Territory Adminstrator’s Council should be authorised to examine the draft estimates and works programmes for the Northern Territory Administration. It is not hard to foresee the difficulties that could arise from allowing the Administrator’s Council in Papua and New Guinea to examine the draft estimates before Government considers them. Thus each ‘Minister’ would be interested in increasing the votes of his department while at the same time trying to keep taxes and charges low—the result would be reflected in the size of the grant requested from the Commonwealth. Perhaps Cabinet may consider the solution to this particular proposal lies in adopting procedures along the lines of paragraph (d) of Decision No. 727 of 16th February, 1965,5 that suggested the members of the Northern Territory Administrator’s Council should have the opportunity to advance views and suggestions on the budget but not the authority to examine draft estimates.
On the more general question of whether the House of Assembly can be given financial responsibility consistent with the degree of political responsibility envisaged, consideration might be given to the suggestion that a thorough examination should be made of the possibility of the Commonwealth grant and loan borrowings being expenditures on administration, law and order, leaving social services to be financed from internal revenue. Any local moves to increase expenditure on social services would then compel consideration of ways and means of increasing local revenue charges. We appreciate that it is intended that the proportion of the Commonwealth grant to the total budget should gradually decrease. We consider that this end would be served by progressively adding the activities to be financed from local revenue. The Minister for Territories in paragraph 17 dismisses what he calls a ‘budget splitting’ arrangement on the grounds that the disadvantages seem to outweigh possible advantages. Nevertheless, it is our view that an examination should be made of this possible method of progressively increasing the financial responsibility of the House of Assembly.
Recommendation
It is suggested that Ministers should consider carefully the proposal to give the Administrator’s Council the authority to examine the draft estimates for the Territory. We also suggest that Ministers might wish to give attention to the Minister’s statement that the views of members of the Council may have to be accepted on social expenditures in order to gain support for economic measures. Finally, we suggest for the consideration of Cabinet that a thorough examination might be made of the possibility of the Commonwealth grant and loan borrowings being used initially to finance the economic sector and expenditures on administration, law and order, leaving social services to be financed from internal revenue.
[NAA: A4940, C 1724 part 2]
PNG’s Australian public servants: morale and the future of the Territory
From the early 1960s, the Public Service Association (PSA) of PNG engaged the Australian Government in discussions over the future of expatriate officers serving in the Territory.1 In 1962, assurances were given that the Commonwealth intended to protect the superannuation entitlements of these officers. It was also said that ‘[permanent] expatriate … officers who continue to serve in the Territory in carrying out the Government’s intention … and whose careers are terminated before normal retirement age for the sole reason that they are replaced by people serving under local conditions, will be assisted to provide other employment or will be provided with reasonable compensation for loss of employment’. But the PSA remained unsatisfied and pushed for a detailed and formal scheme for compensation.
Territories was responsive to this demand. Between 1962 and March 1965, 570 permanent officers resigned—representing over 10% of the expatriate government workforce—and the contract staff that replaced them were less experienced. Barnes told Cabinet that
the effectiveness of the public service is declining. An ever-increasing proportion of new staff has to be set-off against wastage with the result that the overall net gain needed to achieve the aims of policy is becoming more difficult to maintain.
He further pointed to ‘a continuing need after self–government for at least some Australian permanent officers of the present Territory Public Service’. He therefore recommended adoption of a prescribed system of compensation.
Cabinet approached the problem cautiously. It was not until the tabling of a report from an interdepartmental committee2 and after hearing Barnes’ objections to an alternative Treasury plan3 that Cabinet gave in-principle support to the scheme.4 Moreover, the details of the plan were not approved until after examination by an independent expert.5 This adviser endorsed Barnes’ original scheme as being the most appropriate.
In late 1968, the Government made a further attempt to reassure expatriate public servants by translating into law previously informal guarantees of superannuation entitlements.6
Mineral discoveries on Bougainville island
Mining company Conzinc Riotinto of Australia (CRA) began exploration for copper on Bougainville in December 1963,1 and by October 1964 it felt able to indicate ‘confidentially’ to External Territories that the results were ‘encouraging’.2 The reasons for this enthusiasm soon became clearer: CRA had discovered ‘wide dissemination of copper mineralisation’ in central eastern Bougainville, south-west of Kieta on the western fall of the Crown Prince range.3 This, the company noted, was of ‘potential economic importance’.
Conzinc’s revelation was accompanied by requests for official assistance. Indeed, in its earliest correspondence, the company suggested that it would need the ‘fullest cooperation from the Government’, reminding Canberra of the ‘great significance of any economic discovery in this area’.4 The Government was eager to help. Apart from practical aid in the form of prospecting equipment,5 CRA was strongly supported by Territories in its desire to prospect larger areas of the Territory, an objective which required legislative amendment. in a letter to the Administrator of 7 December i964, Warwick Smith wrote:
It is considered that experienced and financially sound companies, such as C.R.A., should be given every encouragement to carry out large scale mineral prospecting. Once minerals have been found in sufficient quantity to make exploitation an economic proposition the Administrator should be able to impose conditions that will ensure the greatest possible economic advancement of the Territoty … This matter is considered to be of the utmost importance and every effort should be made to ensure that the Ordinances are amended at the next session of the House of Assembly.6
This communication prompted an early sign that the plans of CRA and the Government might meet resistance. vo Wood (Chief, Division of Mines, Department of Lands, Surveys and Mines, PNG) phoned from Port Moresby on the same day, warning that the proposed amendment ‘may not be readily accepted by the native members {of the House of Assembly] and any attempt to force it through … could result in the native members being stubborn’.7 ‘Large scale prospecting and mining’, he argued, were ‘new experiences for the indigenes and for this reason the native members might be reluctant to permit any change’.
When CRA became aware of this concern, it proffered a solution—the company ‘might sponsor a visit by up to six Bougainville people to selected mining operations in Australia’.8 it was also suggested that the six should be accompanied by a person ‘who enjoys the confidence of the Bougainville people’, such as MJ. Denehy, the Assistant District Commissioner at Kieta. A tour of this nature, it was hoped, might ‘assist in giving them some appreciation of the advantages that could result from exploratory work of the kind we are doing’. Barnes approved the idea and ‘did not place much weight’ on ‘possible charges of “bribing” or “brain-washing” unsophisticated people ‘—charges ‘which he thought were largely for consolidated Zinc to consider in any case’.9
Aside from local issues, CRA was anxious in the ensuing months to emphasise other elements of risk inherent in the proposed project and to set these against the potential profit to Australia and the Territory. In a letter of July 1965 to Prime Minister R.G. Menzies, CRA Chairman Maurice Mawby wrote that
A substantial copper mining operation in Bougainville would not only be of interest to us but would be of great economic benefit to the Territory. Moreover a development of this kind by an Australian organization would be a significant Australian contribution to the progress of the Trust Territory.
Deposits of [a low-grade] type are, however, usually workable only on a large scale involving very heavy capital expenditure, and this implies a long period of tenure. The expectation that New Guinea will attain independence within the life of such an operation could raise political questions about which I may seek an opportunity to talk to you a/the appropriate time.10
Other communications placed the ongoing expense of exploration alongside the uncertainty of ‘knowing whether the deposit will be economic’.11
The major factor in CRA s thinking was evident in a letter of December 1965 from the Company to the Administration: ‘[we last week] saw Mr. Warwick Smith at Canberra … and explained that we intended to have discussions with you in February with the object of determining conditions under which we would be able to operate … [and with] the object of ultimately completing an agreement which would be ratified by the House of Assembly’.12
Meanwhile, the visit of Bougainville leaders to Australia had occurred over three weeks in September and October 1965. For CRA, the tour took on added importance given events in Bougainville during May. The people of Mainoki—reportedly incited by Catholic priests who believed the company to be exploitative—had ‘strongly resisted efforts to establish a drill’.13 But the tour did not proceed smoothly. The group travelled to a number of mining centres, including the open cut mine at Mt Morgan, where one of the group, Mirintoro Taninara of Guava village, was ‘“terrified and required reassurance” as he envisaged that mining operations would result in the destruction of his land’.14 In Canberra, where discussions were held with Territories officials, the Bougainvilleans insisted that the ‘owners of the land should share in the royalties received by the Administration’; that ‘companies should allocate a proportion of their profits to a local development fund’ (with a figure of 25% floated); and that the Administration ‘should spend a more reasonable proportion of available funds on developments in Bougainville than it has done in the past’.15 These claims were heard sympathetically—yet it was a response that was subsequently discounted within DOT: the officials had ‘not [been] aware of the implications involved in promises of what rights or privileges might be enjoyed in relation to mining development’.16 (Barnes’ spoke briefly with the Bougainvilleans prior to the meeting,17 though there appears to be no record of what he said.)
For its part, the group believed its requests ‘were acceded to in principle’,18 but these expectations were ‘quickly dashed’.19 In a visit to the island in February 1966, Barnes told the Kieta local government council that landowners would not receive royalties20 and he stated repeatedly that rights to minerals and their benefits belonged to PNG as a whole.21 An Administration report later commented that after this point ‘Opposition hardened’ and the ‘people opposed any extension of activity to areas other than those where the Company was already established’.22
1 D. Steele Craik, Acting First Assistant Secretary, General Financial and Economic Branch, Department of the Treasury.
2 Document 5.
3 Matter omitted is a summary of Document 5.
4 Not printed.
5 Not printed.
1 The following paragraph is based on submission no. 817, Barnes to Cabinet, 24 May 1965, NAA: A5827,volume 25.
2 Submission no. 843, Barnes to Cabinet, 22 June 1965, NAA: A5827, volume 26.
3 Submission no. I 067, Barnes to Cabinet, 27 September 1965, NAA: A5827, volume 33.
4 Decision no. 1284, 29-30 September 1965, ibid.
5 See submission no. 3, Barnes to Cabinet, 27 January 1966, and decision no. 8, 3 February 1966, NAA: A5841, 3.
6 See submission no. 534, Barnes to Cabinet, 27 October 1967, and decision no. 739, 6 December 1967, NAA:A5842, 534. Cabinet agreed to Barnes’ recommendation in spite of opposition from the Prime Minister’s Department (see note on submission no. 534 by Munro, 5 December 1967, ibid.).
1 Brief for Barnes by F.L. Ahrens, (Assistant Secretary, Economic Policy Branch, DOT), January 1966 (no precise date), NAA: A452, 1964/6550.
2 Letter, Maurice Mawby (Chairman, CRA) to Warwick Smith, 2 October 1964, ibid.
3 Letter, Haddon King (Director, CRA Exploration) to D.S. Grove (Director, Department of Lands, Surveys and Mines, PNG), 31 December 1964, ibid. It is likely that details of CRA’s discovery were communicated to Government earlier than this; see file under reference for allusion to meetings between DOT and CRA between October and December.
4 Letter, Mawby to Warwick Smith, 2 October 1964, ibid.
5 See Letter, King to Grove, 31 December 1964, ibid.
6 Letter, Warwick Smith to Cleland, 7 December 1964, ibid.
7 Minute, F.S. Evatt (position unidentified, DOT) to anonymous recipient, 9 December 1964, ibid.
8 Letter, King to Cleland, 31 March 1965, ibid. At this stage, CRA made no distinction between the wishes of the people of Bougainville and the indigenous members of the House.
9 Minute, Swift to G.O. Gutman (First Assistant Secretary, Economic Division, DOT), 26 May 1965, ibid.
10 Mawby to Menzies, 22 July 1965, ibid.
11 King to Warwick Smith, 24 August 1965, ibid.
12 F. F. Espie (General Manager, Industrial Division, CRA) to F. C. Henderson (Acting Assistant Administrator (Economic Affairs)), 17 December 1965, ibid. A letter of 28 January 1966 from Espie to Warwick Smith left little doubt as to CRA’s purpose in highlighting these problems: ‘It is hoped that the Government and the Administration will in the course of these [upcoming] discussions recognise the need to give every encouragement towards the establishment of a low grade operation of this kind in the Territory, which has an urgent need for an economic undertaking of this type, but where the political future is uncertain’ (ibid.).
13 TIC paper no. 3/68, ‘Situation report on the Bougainville District’, 12 September 1968, NAA: A452, 1968/4999.
14 loc. cit.
15 Note for file by Ahrens, 30 September 1965, NAA: A452, 1966/458.
16 Minute, D.T. Lattin (Officer-in-Charge (OIC), Economic Policy Section, DOT) to Gutman, 10 February 1966, ibid.
17 TIC paper no. 3/68, ‘Situation report on the Bougainville District’, 12 September 1968, NAA: A452,1968/4999.
18 Report by Denehy, 7 October 1965, NAA: A452, 1966/458.
19 TIC paper no. 3/68, ‘Situation report on the Bougainville District’, 12 September 1968, NAA: A452, 1968/4999.
20 Downs, The Australian trusteeship, p. 344, citing a speech of 9 March 1966 by Paul Lapun, MHA Bougainville open electorate.
21 South Pacific Post, 14 February 1966, NLA: NX 342.
22 TIC paper no. 3/68, ‘Situation report on the Bougainville District’, 12 September 1968, NAA: A452,1968/4999.