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By Mary-Louise O'Callaghan South Pacific Correspondent

PORT MORESBY, Papua New Guinea (August 12, 2002 – The Australian)---Papua New Guinea's new Prime Minister, Michael Somare, has halted the controversial multi-million-dollar privatization program of his predecessor, Mekere Morauta.

In his first major policy move since taking office a week ago, Sir Michael said yesterday that the freeze would include the AUD$ 50 million (US$ 26,760,000) sale of Telikom to a consortium led by its Fiji counterpart, finalized just days before he took office.

Sir Michael also warned that his government was facing an 800 million kina (US$ 207,040,000) deficit this year if it did not cut expenditures and find ways of increasing government revenue.

The Somare government signaled last week that it planned to slash expenditure by K500 million (US$ 129,400,000) to rein in the deficit. Sir Michael, who had been expected to announce his Cabinet yesterday, said he wanted to freeze the privatization program in order to seek the views of his coalition partners.

He said the freeze on privatization did not mean the program would not continue once it and the options had been properly considered. "Most of these institutions, I remember in my time, they were making money, (they) were making profit and paying money to the Treasury.

"Why so suddenly are we saying they can't make money?"

Sir Michael yesterday blamed privatization for the defeat of the Morauta government. In fact, the privatization program became a centerpiece of a campaign to undermine the credibility of Sir Mekere's government with ordinary Papua New Guineans.

This strategy included the public protests in Port Moresby last year that led to the deaths of four students during clashes with police.

He said one alternative to selling off government bodies was to look at putting in better management.

"It's not that Papua New Guineans cannot do it, they can do it, but you (have to) appoint the right people," he said.

However, he left the way open for his government to continue with the program.

"There is no reason why privatization shouldn't go ahead if it is in the interests of all parties concerned, especially the people and the economy of Papua New Guinea."

In fact, the Morauta government's privatization plan, endorsed by the World Bank, had received little interest from outside investors unwilling to take on the large debts that most of the government bodies earmarked for sale had accumulated.

The national airline, Air Niugini, and national power company, Elcom, are the next big-ticket items due for privatization.

Sir Michael yesterday played down threats by Southern Highlands’ leaders to disrupt the operation of resource projects because of disputes arising from the disrupted elections.

He said he was still waiting on a briefing from the electoral commissioner but that he hoped fresh elections could be held in the violence-prone region this year.

Sir Michael said he was establishing a code of conduct for his ministry, which he expected to announce in the next 48 hours ahead of the visit by his Australian counterpart, John Howard.

For additional reports from The Australian, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Australian.

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