Will Skate's resignation put end to PNG crisis

Will Skate's resignation put end to PNG crisis

By Paul Tait

SYDNEY (Reuters): Taiwan's newest friend in the community of
nations could be about to turn its back after Bill Skate's
resignation as prime minister of Papua New Guinea.

But analysts warn that it's still too early to write off
either Skate -- or the controversial deal he engineered with
Taipei to rescue his South Pacific nation from economic crisis.

Skate, who had faced a no-confidence vote when parliament
resumes on Tuesday, handed in his resignation on Thursday but
made clear he would fight to resurrect his leadership.

PNG experts said a Lazarus-like revival was not out of the
question given the country's idiosyncratic approach to democracy.

"In one way it seemed to make sense because he just didn't
have the numbers but there could be a trick up his sleeve, he
could make a deal with someone else," said Theo Levantis, PNG
specialist at the Australian National University (ANU).

"What he's doing is unpredictable because he might try
anything to give himself some sort of chance," Levantis said.

Muddying his demise was Monday's deal to turn away from long-
standing ties with China and recognize its diplomatic rival
Taiwan.

Official documents obtained by Reuters showed Skate went to
Taipei with a shopping list seeking US$2.35 billion in financial
help -- enough to wipe PNG's entire government debt.

The deal sparked regional disquiet and its future is now the
subject of as much conjecture as that of Skate himself.

Former Skate ally Sir Mekere Morauta, seen as the frontrunner
to succeed Skate, said on Wednesday he would review the Taiwan
deal and its implications should he win the prime minister's job.

He told Australian Broadcasting Corporation radio: "As a new
government I have flexibility to review everything, including
that (the Taiwan deal)."

"It's something I'd have to be very careful (about) because
it's not just between Papua New Guinea and Taiwan. There are
regional and international implications and I'd have to be
mindful and sensitive to that."

Morauta's People's Democratic Movement (PDM) deserted Skate's
fragile coalition 11 days ago, and now claims to control 81 seats
in the 109-seat parliament.

Talking about what Skate, Levantis told Reuters: "He must have
something up his sleeve somewhere because it's a strange decision
to arrange the deal more or less the day before (his
resignation)."

Some believe the ace up his sleeve might be the example set by
Sir Paias Wingti, who quit as prime minister in 1993 only to re-
nominate the following day.

"He might be doing the Wingti thing, he might have made some
sort of deal where he might get a second in line post," Levantis
said from Canberra.

Skate himself hinted at such an outcome after formally handing
his letter of resignation to Governor Gen. Sir Silas Atopare on
Thursday, saying he believed he would be "in the first three" at
an election.

Skate managed to avoid the no-confidence vote longer than
expected, deciding last December to adjourn parliament for seven
months at the end of his statutory 18-month grace period.

Analysts believe his next move might be to sponsor a new
candidate to save his PNG First government.

Others say international markets will welcome Skate's demise
after PNG's economy nose-dived during his tenure.

Droughts which hit hard at PNG's important resource exports
like minerals, timber and palm oil and the Asian economic crisis
were beyond Skate's control.

His government has been forced to use interest rates to
protect the vulnerable kina currency, sparking a vicious cycle of
inflation and currency depreciation.

The International Monetary Fund (IMF) and the World Bank both
balked at overtures from PNG and talks stalled over structural
concerns. The IMF warned in March PNG faced a "looming financial
crisis" due to a surge in government spending.

"I suspect that this will be some comfort to international
monetary markets and that is certainly important because the kina
has been plunging, inflation has been rising," Hank Nelson,
history professor at Canberra's ANU, said of Skate's resignation.

"The Taiwan move must have put some alarms into the
international economic community," he said.

As for the political future, analysts say Western notions of
loyalty matter little in the South Pacific nation of 4.5 million
people where corruption is endemic, tribal ties are paramount and
votes can still be bought in exchange for pigs.

"Loyalty is very, very sparse in the PNG political context,"
said Sean Dorney, the Australian Broadcasting Corporation's
veteran PNG observer.

The rough-edged Skate succeeded Sir Julius Chan, who was voted
out after the Sandline mercenary fiasco. The former Port Moresby
mayor sidestepped the traditional kingmakers of PNG politics to
cobble together a coalition for his PNG First party The coalition
fell apart when the PDM quit.