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PORT MORESBY, Papua New Guinea (The National, Sept. 25) - A bill
proposing new funding arrangements for provincial and local governments in 2004
could see them receive an additional K18 million (US$5.5 million) from the
National Government. 

The changes include abolishing the K500, 000 District
Development Grant (DDG) currently received by each member of parliament for
their electorates, and for value-added tax collections to be shared on a 60:40
basis between the national and provincial governments.

Inter-Government Relations Minister Sir Peter Barter said the
funding arrangements, which were revised by the National Economic and Fiscal
Commission, will operate on an interim basis only in 2004, while NEFC finalises
its proposals for more permanent changes to the Organic Law.

He said the key objectives of the changes would to be bring the
grant formulas back within affordable limits, direct funding specifically to
core priorities of health, education and road maintenance (through function
grants) to lay foundation for implementation of the medium-term development

Sir Peter said some of the main features of the changes include
the new VAT distribution arrangement (60:40 with no province receiving less than
they did in 2003) is applied. 

The DDG and Provincial Development Grant (PDG) would be
calculated on the basis of population (K9 per head for district grant and K1.50
per head for the provincial grants) instead of K500,000 per electorate.

A quarter of the DDG and PDG funds would be designated as a
grant for maintenance of transport infrastructure. Bougainville and the National
Capital District will not be covered by the proposed changes.

Sir Peter said a new grant type called the Less-Developed
District Grant has been added to find a way to fund provinces with a poor
development status or having few revenue sources like mines or oil. 

He said the derivation grant would be fixed at .75 percent to
give provinces an assured income and will now be paid to the province of
production rather then the province of export.

He said provincial government must use derivation grant only to
promote the production of primary products for secondary processing and export,
or for rehabilitating infrastructure, which needed to allow primary producers to
take their produce to a port, airport or market place.

September 25, 2003

The National:


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