May 29, 2019 / 12:56 AM / 4 months ago

Papua New Guinea PM quits after turmoil, new leader due on Thursday

SYDNEY (Reuters) - Papua New Guinea (PNG) Prime Minister Peter O’Neill quit on Wednesday after losing the confidence of parliament during weeks of political turmoil in the South Pacific nation, but government supporters in parliament hoped to be able to retain power.

FILE PHOTO: Papua New Guinea's then Prime Minister Peter O'Neill makes an address to the Lowy Institute in Sydney, Australia November 29, 2012. REUTERS/Tim Wimborne/File Photo

O’Neill was met with applause when he announced to parliament in Port Moresby that he had handed his resignation to Governor-General Bob Dadae on Wednesday morning. The resignation headed off a no-confidence motion he seemed sure to lose.

“It has been my great honor to serve this nation and lead this nation almost for eight years ... unfortunately politics in PNG plays out this way,” O’Neill told parliament.

“For the interests of the ongoing political stability and to ensure that we create confidence in the business community and the economy so that we can continue to have social unity in the country, it is important that I vacate this seat so that we can be able to move on.”

O’Neill was embraced by supporters and shook hands with opposition lawmakers after addressing parliament.

The assembly then adjourned and will reconvene to elect his successor on Thursday, drawing a line under a period of chaos but also triggering a new round of deal-making.

It was not immediately clear whether O’Neill’s government could survive, though government members of parliament were confident of holding on as they crunched the numbers of supporters.

“It’s very open-ended now,” said Paul Barker, executive director of the Institute of National Affairs, a Port Moresby-based think-tank.

“It’s going to be a fascinating 20-or-so hours until we see what the outcome is,” he said.

Analysts say the turbulence could delay resource projects on the drawing board and major energy companies involved in PNG, including Total SA and ExxonMobil Corp, are watching closely.

Political instability is not unusual in the poverty-stricken but resource-rich country. Growing concern over governance and resource benefits not reaching the poor drove the latest attempts to topple O’Neill.

HORSE-TRADING BEGINS

Under O’Neill’s watch, production at a big liquefied natural gas (LNG) project has transformed the economy and the country stepped onto the world stage when it hosted an APEC summit in November.

But frustration from landowners and local-level officials who have largely missed out on benefits from the gas development and allegations of graft and mismanagement dogged his years in office.

A backlash over wastefulness when PNG ordered 40 Maserati cars to ferry world leaders around during the APEC meeting was swift and strong.

After O’Neill agreed a gas deal with Total for an expansion of LNG production, Finance Minister James Marape quit, protesting it was too generous to the oil major.

O’Neill had promised to resign on Sunday after a string of defections plunged his leadership into question and cost him his parliamentary majority.

“You have taken a decision that I think your country would be proud of,” opposition leader Patrick Pruiatch told parliament. “I think you have responded and you have demonstrated leadership.”

Pruiatch is a possible replacement for O’Neill, although politicians decamped to Port Moresby hotels to negotiate their next moves and any number of contenders could emerge.

“The horse-trading is on,” said Jelta Wong, who was among nine members of parliament to desert the government’s ranks on Friday.

But by Wednesday afternoon some of those deserters had returned to the government side, according to two lawmakers who were at the Crown Hotel in Port Moresby where government loyalists have been based.

The political uncertainty has knocked almost 5% from shares in Oil Search Ltd, an Australian partner in large liquefied natural gas developments in PNG, since the challenge to O’Neill gained traction on Friday.

Business leaders and another development partner, Santos Ltd, dismissed immediate concerns but said developments would be closely watched.

“From a business perspective it is very much business as usual,” Robin Fleming, chief executive of Papua New Guinea’s largest bank, Bank South Pacific, said by email.

“The change will be determined in parliament tomorrow, following which business will be better informed as to whether a change in the prime ministership will be accompanied by policy changes or refinements to policy,” Fleming said.

Reporting by Tom Westbrook; Editing by Paul Tait, Robert Birsel

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