As Peter O’Neill’s People’s National Congress (PNC) Party takes a firm lead with 26 out of 89 seats declared in the Papua New Guinean national election, the shape of the new government — which will determine national development over the next five years — is still to be defined.

The marathon two-month long election still has another few weeks to go. After final nationwide results are announced on Wednesday, it is likely O’Neill, who is on track to achieve the majority of declared seats, will move to finalise negotiations with myriad political parties to build a coalition capable of taking office before parliament convenes in mid-August.

What is clear is that the leadership tussle between Sir Michael Somare and O’Neill is receding. Somare, who has presided over public life since independence and will remain in politics after his landslide win in the East Sepik provincial seat, has resigned as leader of the National Alliance Party and pledged support for his rival.

O’Neill is not an unknown, but what the final coalition looks like could make a considerable difference. Papua New Guinea has a weak political party system and allegiances are mainly determined by desire for access to power and wealth, rather than commitment to party policies. Many parties and their leaders will want to be part of the PNC’s winning team, which will also include two newly elected female MPs. The Triumph Heritage Empowerment Party led by Don Polye, in second place with 11 declared seats, will want a major role.

But O’Neill is also set to team up with two former prime ministers, the People’s Progress Party, led by Sir Julius Chan, which currently has six seats, as well as Paias Wingti.

Dr Ron May, from the Society and Governance in Melanesia Program, Australian National University (ANU), commented that any coalition is possible, but it is likely to be a broad one.

“We will get a better system than we have had since August last year. There needs to be a properly elected government in place in order to move beyond the recent impasse. There is likely to be a broad coalition and a certain degree of stability. So that won’t be a problem,” he said. “But what could eventuate is a government of broad national unity making pretty much unilateral decisions in parliament with no effective opposition providing any debate on issues.”

Many ordinary Papua New Guineans have invested great hope in O’Neill’s political promises of stability and prosperity after years of relentless poverty and inequality. The country has now recorded nine years of economic growth, but weak volatile governance, corruption, rapid population growth, high formal unemployment and poor public services and infrastructure continue to affect widespread social grievances and youth disenfranchisement.

O’Neill is hailing a new socio-economic horizon of free and subsidised education, health care and improved basic services. But Dr Bill Standish, research associate at the ANU with 40 years experience studying PNG politics, says this has also entailed “raising unrealistic expectations of the massive revenue shifts which will come with the big LNG projects”, destined to pay for the new era of social transformation.

“Expert opinion is that the LNG funds will not kick in for another five years [the length of the next term of government],” Standish explained. “A number of MPs are also trying to increase the royalties going to local land owners and provinces, rather than to the national government, which could destabilise the resources sector and weaken national revenues.”

In Australia, O’Neill’s rhetoric of tackling national unity, development, corruption and achieving universal education is aligned with Canberra’s vision of regional stability and socio-economic prosperity.

Australia is Papua New Guinea’s largest international aid donor with AusAID funding increasing from $482.3 million in 2011-12 to $491.7 million in 2012-13 and partnership development programs focused on building capacity and delivery in education, health, law and justice and transport sectors.

Standish believes the defence and police partnerships between the countries are positive, but observed: “The new parliament will comprise a younger generation of politicians with almost no experience of Australia, and now that Australian aid is only 10% of the budget the ministers are likely to continue the trend of ‘looking north’ towards Asia for trade.

“The three former prime ministers who have teamed up with O’Neill’s coalition have all perceived paternalism and carried resentments against Australian tied aid.”

But at the local level in Papua New Guinea, many community leaders, as well as public sector professionals, disenchanted with nepotism and undelivered political promises, openly welcome and seek Australian aid, which has practically benefited their lives.

Meanwhile, the strong economic relationship between Australia and Papua New Guinea, dominated by Australia’s investment in PNG’s mining and resource sector, is likely to benefit from potential greater political equilibrium. Australia has a considerable stake in PNG LNG, the nation’s largest natural gas project, an Exxon Mobil-led joint venture, which includes a partnership with Australian companies, Oil Search and Santos and a $350 million Australian export credit loan

“We need to worry about the LNG project because there are many land owners in the Southern Highlands expecting big returns and the potential for land owner disgruntlement will be great,” May said. “The government is going to have a lot of issues and problems in handling this project. O’Neill, who is from the Southern Highlands [where gas production is located], is well placed to handle it. But Australia will also have to keep an eye on it.”

Twelve years after the Bougainville Peace Agreement, Australia also needs to train its eye on ensuring that the interests of ordinary Papua New Guineans, their justice and well being, are as important as economic priorities in resource extraction projects.

The Australian government is assisting the PNG government to set up a Sovereign Wealth Fund to promote transparent management of the substantial LNG revenues. But with Papua New Guinea’s Investigation Task Force Sweep concluding this year that corruption is now “institutionalised” across government departments, the risk of the resource curse and a population denied the benefits still seriously hovers.