Updated: 06/25/2014 01:10 | By Agence France-Presse

Australia warns political instability unhelpful for PNG

Australia on Tuesday warned neighbouring Papua New Guinea against political instability after the Pacific nation's leader was accused of authorising millions of dollars in illegal payments. 

Australia warns political instability unhelpful for PNG

Papua New Guinea's Prime Minister Peter O'Neill poses in Brisbane on July 19, 2013 - by Aman Sharma

PNG Prime Minister Peter O'Neill, who was elected in 2012, was last week served with an arrest warrant for alleged corruption and misuse of funds.

O'Neill, who denies the claims which he says are politically motivated, promptly sacked his attorney general and dismissed the head of the nation's anti-corruption taskforce, Sam Koim.

Australia's Foreign Minister Julie Bishop said Papua New Guinea was a "dear friend" of Australia as she warned against political instability.

"This kind of political volatility does not assist PNG in advancing the interests of their citizens," she told Sky News.

The two countries are close neighbours with Canberra sending asylum-seekers to the Pacific state's Manus Island, while PNG receives more than $500 million (US$470 million) in foreign aid each year from Australia.

Koim, in Australia to meet Bishop, stood by his accusations against O'Neill, saying he believed there was enough evidence to mount a case.

The allegations relate to payments worth some Aus$20-25 million to lawyer Paul Paraka from the Department of Finance.

"We basically made an assessment of the case and we found that Mr. O'Neill knew that the bills were improper and he dishonestly directed the bills to be paid to a law firm that did not deserve those bills," Koim told the ABC.

Koim estimated about Aus$2 million of this money had made its way into Australian bank accounts.

"We just pursued a course of justice and I would want Australia to see that it is an individual who is undermining the rule of law, the very thing that Australia has helped over the years to build it up," he said, referring to O'Neill.

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