Peace Agreements Digital Collection: Bougainville (Papua New Guinea)
Bougainville Peace Agreement
Autonomy (continued)
Transfer of Powers and Functions
Process for Transfer
Initiating Transfers
Powers and functions will be transferred from the National Government to the autonomous Bougainville Government, which will initiate the process, taking full account of needs and capacity, by notifying and consulting the National Government in advance.
Initial Powers and Functions
The autonomous Bougainville Government will be established with at least the same powers and functions as the Bougainville Interim Provincial Government.
The Bougainville Interim Provincial Government will give the National Government reasonable advance notice of any powers or functions to be transferred or institutions to be established by or under the Bougainville Constitution in the first twelve months after the establishment of the autonomous Bougainville Government.
Notice of Additional Transfers
The autonomous Bougainville Government will give the National Government at least twelve months notice of its intention to seek the transfer of any additional power or function.
Implementation
Closely linked powers and functions will be transferred together.
Any differences over such links or transfers will be resolved through the agreed dispute resolution procedure.
National laws will continue to apply in Bougainville until replaced by Bougainville laws.
If the capacity or economic circumstances affecting the resources necessary for a transfer of a power or function are such as to prevent effective exercise of that power or function, then the National Government and the autonomous Bougainville Government will consult with a view to preparing an agreed plan for overcoming any difficulties.
If differences arise in reaching agreement, implementing a plan, or as to whether the capacity or circumstances should delay the transfer, then either Government may seek to resolve the issues in dispute through the agreed dispute resolution procedures.
In addition to other agreed dispute resolution procedures, such procedures may include an agreement to appoint a panel of independent experts to make recommendations on issues concerning capacity or economic circumstances or the content or implementation of a plan.
The panel of experts may make recommendations on whether failure to reach agreement on capacity or economic circumstances or to implement a plan is on reasonable grounds.
The report of the panel of experts may then be taken into account in the dispute settlement process.
National and Regional Institutions and Services
In any case of an institution or service which is organised on a regional or National basis and either the National Government or the autonomous Bougainville government believes that the personnel, assets or funding associated with the institution or service cannot be readily divided on a basis which is viable regionally, nationally and in Bougainville, then the National Government and the autonomous Bougainville Government will agree to:
a plan for achieving a mutually acceptable division; and/or
an arrangement which ensures the existing organization continues, together with guaranteed access for the autonomous Bougainville Government and Bougainvilleans.
If differences arise over whether personnel, assets or funding of an institution or service can be readily divided or in agreeing or implementing a plan or agreement for shared access or use, they will be resolved through the agreed dispute resolution procedure.
Delegation of Powers over Public Service, Police and CIS
Agreed arrangements for the delegation of powers over the Public Service, Police and CIS in Bougainville will be implemented by the National Government immediately on request from the Bougainville Interim Provincial Government (in consultation with the Bougainville People's Congress) or, when it is established, the autonomous Bougainville Government.
The autonomous Bougainville Government may exercise its powers to establish a Bougainville Public Service, Police and CIS when agreed plans have been implemented.
Agreed Plans for Implementation
The National Government and the autonomous Bougainville Government will jointly prepare agreed plans for co-operating in implementing the transfer of powers and functions for which the autonomous Bougainville Government will become responsible.
The agreed plans will be made up of criteria, indicators and targets of capacity and resources available to or required by the autonomous Bougainville Government that should be taken into account in making proper preparations for the transfer of particular powers and functions.
Agreed plans in relation to the transfer of powers and functions over Police may provide for transfer to be gradual.
Associated Arrangements
National Government Assets and Land
National Government assets and land will be transferred to the autonomous Bougainville Government at the same time as the powers and functions with which they are associated.
The National Government will have the right to retain such assets and land as may be required for its continuing responsibilities in relation to the same powers and functions.
The future of other National Government assets and land will be subject to future negotiation.
Privatisation Issues
The National Government will use its best endeavours to ensure that any future privatisation takes account of the agreed autonomy arrangements.
The National Government will use its best endeavours to ensure that any future privatisation takes account of the need to rebuild the infrastructure of Bougainville following the crisis, and may take steps to ensure that community service obligations relating to Bougainville, including restoration and development, are recognised by purchasers of privatised assets in Bougainville.
The National Government will use its best endeavours to ensure that potential purchasers are made aware of the capacity of the autonomous Bougainville Government to develop laws and policies that might impact on the operation of proposed privatised enterprises, and of the sensitive nature of unresolved issues regarding the economic and property rights of Bougainvilleans and their ability to participate in economic activity in Bougainville.
Human Rights
The autonomous Bougainville Government will have the power to provide additional guarantees of human rights in Bougainville, which do not abrogate the human rights provisions in the National Constitution.
The autonomous Bougainville Government will have the power to establish mechanisms for enforcement of human rights that do not abrogate the human rights provisions in the National Constitution.
The autonomous Bougainville Government will have the power to qualify human rights incidental to the exercise of its powers and functions under Section 38 of the National Constitution, except in relation to Œdefence'.
Proceedings for the enforcement of human rights by residents of Bougainville may be commenced in Bougainville courts or institutions or the National Court.
The Supreme Court will remain the final court of appeal on human rights matters.
The National Government and the autonomous Bougainville Government will establish a joint commission to examine and report on the issues that would be involved in giving the autonomous Bougainville Government power to make laws permitting courts or Councils of Elders to require clan-groups to which persons convicted of criminal offences belong to meet customary, non-custodial obligations.
The terms of reference for the commission will direct it to have full regard for:
the aspirations of Bougainvilleans for the integration of custom and introduced law;
the national human rights regime;
the justice system in Bougainville and Papua New Guinea as a whole; and
the international human rights system and other relevant aspects of international law.
The joint commission will be established at the initiative of either Government; its membership will be mutually agreed; the costs of the commission will be shared.
The commission's report, which will be submitted by an agreed date, will be tabled for consideration in the National Parliament and the Bougainville legislature.
The National Government and the autonomous Bougainville Government will inform one another of the outcome of the debates in their respective legislatures, and co-operate in giving effect to mutually acceptable, practical follow-up action, as may be appropriate, through consultation, the joint supervisory body or the agreed five-yearly reviews.
The above procedures may also be used to follow-up on doubts about whether the autonomous Bougainville Government has power under the existing human rights provisions to make laws regulating or restricting the qualified rights other than laws made in accordance with Section 38 of the National Constitution.
Financial Arrangements
Basic Principles
The autonomous Bougainville Government will have sufficient revenue-raising powers available to it to become financially self-reliant.
Bougainville will continue to make a fair contribution to National Government costs before fiscal self-reliance, through the National Government retaining control over company tax, Value Added Tax and customs duties in Bougainville; and after self-reliance, through a revenue-sharing formula.
Except as otherwise provided the additional costs involved in establishing and maintaining the agreed autonomy arrangements will be shared between the autonomous Bougainville Government and the National Government.
Taxation
The National Government will support the autonomous Bougainville Government in moving towards the goal of fiscal self-reliance, defined as the year in which the revenue from company tax, 70 per cent of Value Added Tax and customs duties is equal to the value of the recurrent grant on a sustainable basis.
Revenue from company tax, customs duties and 70 per cent of Value Added Tax collected in Bougainville will go to a trust account for Bougainville and be credited against the recurrent grant at least until Bougainville achieves financial self-reliance.
"Company tax" is understood for this purpose as tax on profits of companies whose principal place of business or main business activity is in Bougainville.
When the autonomous Bougainville Government achieves fiscal self- reliance, revenues from these sources (in excess of the costs of recurrent activities calculated in accordance with the recurrent grant formula) will be shared between the National Government and the autonomous Bougainville Government so as contribute to both National and Bougainville development.
The 5-yearly reviews of financial arrangements should be used to consider the issues involved in revenue sharing.
The National Government will continue to impose and collect personal income tax in accordance with the provisions below until such time as restoration is achieved.
Revenue from personal income tax collected from Bougainville will be paid directly to a trust account for the autonomous Bougainville Government and distributed to the autonomous Bougainville Government on its request to be used to support development in Bougainville.
The autonomous Bougainville Government will have the power to adjust the rate of personal income tax to apply in Bougainville by no more than five per cent.
The autonomous Bougainville Government will assume the powers and functions to impose, set rates of, and collect personal income tax when restoration is achieved.
Revenues from all other existing National Government taxes (including 30 per cent of Value Added Tax) collected in Bougainville will be paid direct to the autonomous Bougainville Government
The National Government will retain the power to set rates for company tax, Value Added Tax and customs. But after fiscal self reliance the autonomous Bougainville Government will have power to set rates and collect company tax; provided that the effective rates of company tax will not vary from the National Government's rate by more than five percentage points.
The autonomous Bougainville Government will have power to set rates or establish its own tax regime for all other existing National Government taxes (e.g. export tax, excise) and all taxes that have been available to provincial governments under the National Constitution.
The Internal Revenue Commission will initially collect all taxes for the autonomous Bougainville Government but the autonomous Bougainville Government will have the power to establish its own tax office to collect Bougainville taxes as well as, by agreement, company tax, Value Added Tax, and customs duties.
The autonomous Bougainville Government will be eligible for tax incentives available in the Income (Company) Tax Act.
Both the National Government and the autonomous Bougainville Government will have the right to audit taxes paid into the above trust accounts or collected on behalf of the other.
Grants System
Until the autonomous Bougainville Government becomes fiscally self-reliant, the National Government will provide grants to the autonomous Bougainville Government, including the following kinds of grants:
recurrent unconditional grants;
restoration and development grants;
specific purpose conditional grants, including the recurrent grant for policing; and
the one-off Establishment Grant.
As the autonomous Bougainville Government's revenue increases, grants will decrease according to an agreed set of factors.
Recurrent Grants
The autonomous Bougainville Government will receive an annual unconditional grant to cover the recurrent costs of functions for which it is responsible including funding of newly transferred powers and functions, based on their costs.
The funding of maintenance and operational costs of former development projects will be subject to consultation when funding is sought for new projects.
These consultations will be based on mutual recognition of constraints on the National Government, the particular situation in Bougainville during the early phases of restoration, and cost sharing
The grant will be adjusted annually in the same manner as annual grants for a provincial government activity under the Organic Law on Provincial Governments and Local-level Governments - that is, by the percentage increase or decrease in the cost of living or by the percentage increase or decrease in the payments to the Consolidated Revenue Fund in the year two years before the year of grant.
The calculation and timely payment of the grant will be guaranteed by law (debt servicing and salary obligations must be paid first).
The grant will be cut only if seriously adverse economic conditions arise, requiring "across the board" cuts to the National Budget and by no more than the average of these cuts.
In years when overall public expenditures increase, the National Government will do its best to increase the recurrent grant to balance any cuts in previous years.
The autonomous Bougainville Government will have full control over use of this grant.
The autonomous Bougainville Government will prepare plans and consult the National Government in cases where it wants to reallocate funds in ways which affect the continued employment of public servants or other forward commitments.
Restoration and Development Grant
The autonomous Bougainville Government will receive an annual restoration and development grant no less than the 2001 Public Investment Programme (PIP) and adjusted upwards pro rata in accordance with the National PIP averaged over a rolling five year period.
An agreed Bougainville-controlled mechanism, including both Bougainville and National Government representation, will be established to coordinate the restoration and development program in Bougainville.
The National Government representation in that mechanism will be subject to review in the future review process.
Conditional Grants
The National Government may offer to the autonomous Bougainville Government, conditional grants, for purposes:
proposed by the National Government after consultation with the autonomous Bougainville Government and implemented after consultation and agreement between the Governments; or
provided for in this Agreement.
Borrowings - Revenue Raisings
The autonomous Bougainville Government will have the power to raise loans after consultation with the National Government.
Domestic borrowing by the autonomous Bougainville Government will comply with Central Bank regulation of the banking system.
Overseas borrowings will require Central Bank approval.
Any proposed deficit in the Bougainville budget will require approval of the National Government Minister responsible for financial matters.
Establishment Grant
The National Government will mobilise funds for a Œone-off' establishment grant to the autonomous Bougainville Government, which may disburse it over more than one year.
The establishment grant will be additional to all other grants.
The autonomous Bougainville Government will use the revenue raised from personal income tax and excise in Bougainville in the first year of autonomy as counterpart funding for the establishment grant.
This revenue will be used for development purposes decided by the autonomous Bougainville Government.
Foreign Aid
The agreed arrangements for foreign relations will also apply to foreign aid (consultation mechanism, and Bougainville representation on delegations).
The National Government will do its best to obtain foreign aid to support restoration and development in Bougainville, and to facilitate the autonomous Bougainville Government's participation in managing aid projects.
The autonomous Bougainville Government will be able to obtain foreign aid.
The National Government will approve foreign aid secured by the autonomous Bougainville Government, which does not reduce the value of aid already available to Papua New Guinea and subject to overriding foreign policy considerations.
The autonomous Bougainville Government will keep the National Government fully informed of its efforts to obtain foreign aid.
The National Government will co-operate with the autonomous Bougainville Government by negotiating such international agreements as may be required to finalise foreign aid prospects identified by the autonomous Bougainville Government.
Fiscal Accountability
The National Constitution will set out the requirements within which the Bougainville Constitution will establish a framework for orderly management of the autonomous Bougainville Government's financial and other resources.
This framework will include requirements that the autonomous Bougainville Government will do the following in accordance with law:
raise revenues, including loans, and manage National Government grants;
approve and administer annual budgets (and, where appropriate, supplementary budgets), comprising estimates of revenue and expenditure, and appropriations for the main functions of government;
make expenditures;
maintain proper transparent and accurate accounts, compatible with international standards;
ensure that accounts are subject to regular audits additional to audits by the National Auditor-General (or his agents); and
provide for a public accounts committee in the Bougainville legislature, which shall receive, consider and make recommendations on auditors' reports.
The National Public Finance Management Act will continue to apply to the autonomous Bougainville Government's finances until and unless the autonomous Bougainville Government makes a Bougainville law (or laws) in accordance with the framework for management of financial and other resources.
The Bougainville Constitution may make provision for exceptional circumstances in which the autonomous Bougainville Government may find it necessary to raise revenues or make public expenditures without the Bougainville legislature's prior approval (for example, if the budget for a particular year is not passed in good time).
Grants provided to the autonomous Bougainville Government will be subject to audit by the Auditor-General established under the National Constitution.
Follow-Up to Audits
Should any audit carried out by the National Government pursuant to this agreement disclose systematic and widespread abuse (or misuse) of funding provided to the autonomous Bougainville Government by way of Recurrent or Conditional Grant then the following steps will take place -
the National Government will advise the autonomous Bougainville Government of the details of the abuse;
the autonomous Bougainville Government will immediately investigate the concerns raised by the National Government and will take appropriate steps to remedy the situation as soon as is reasonably possible;
should the autonomous Bougainville Government, after investigation, disagree with the National Government's concerns or if the National Government is not satisfied with the response of the Bougainville Government they will consult with each other to resolve the differences;
if the consultations do not resolve the matter the National Auditor General and the auditor responsible for auditing accounts on behalf of the autonomous Bougainville Government will consider the matters in question and provide a report making joint recommendations to resolve these matters;
the autonomous Bougainville Government will implement the reasonable joint recommendations of both auditors to their satisfaction;
if the autonomous Bougainville Government fails to attend to the recommendations within a reasonable time, the National Government may withhold the further release of funds (other than the costs of essential services, such as salaries and medical supplies) until such time as the recommendations have been attended to;
should the National Government or the autonomous Bougainville Government disagree on reasonable grounds as to the recommendations, or should there be a dispute as to whether the autonomous Bougainville Government has implemented the recommendations, recourse may be had to the agreed dispute resolution procedures.
Posted by USIP Library on: April 9 2002
Source Name: Text e-mailed from the Adviser to the Papua New Guinea Government on the Bougainville Peace Process
Date e-mailed: October 31 2001
