Fly-In-Fly-Out Causing Economic Loss

Post Courier | July 15, 2018

The PNG Resource Owners Federation has countered assertions made by the Chamber of Mines and Petroleum that the fly-in-fly-out employee commuter-based system employed by mining and petroleum projects in PNG is economically “balanced”, compared to the alternative of living on site.

According to the Chamber of Mines and Petroleum, FIFO provides the best balance of shared benefits to communities throughout PNG, not confined to host rural communities.

However, the PNG Resource Owners Federation maintains that it denies host rural communities of much need social and economic benefits.

Citing a 1997 study conducted by National Research Institute (NRI) on the economic impact of the FIFO of expatriate staff of one mining project in PNG, Federation president Jonathan Paraia said using the national income accounting equation, it is estimated that on average, the annual loss of national income is between K5.2 million and K13 million.

And considering the multiplier effect, the annual loss must be approximately K11 million and K29 million.

Mr Paraia said continuation of the FIFO system for a decade will cost the economy, including the multiplier effect, between K110 million and K300 million.

Mr Paraia said the economic benefits that could have been derived from a live-on-site arrangement would be employment in the informal sector, disposable income from FIFO employees, GST and other rates, taxes and fees, banking and financial services and trading, commerce and general business activity at all levels.

“The report further found that it was economically viable to build a township to accommodate the FIFO workers from this particular mine instead of the FIFO system.

“In that time, using the report’s formula, the country must have now lost between K253 million and K690 million over the period of the life of this particular project.

“The number would clearly run into many billions if all projects that practice the FIFO in the country are taken into account,” Mr Paraia said.

2 Comments

Filed under Financial returns, Papua New Guinea

2 responses to “Fly-In-Fly-Out Causing Economic Loss

  1. Wiseman

    I totally agree that PNG government must put its peoples (LO/PG) must consider loosing millions of kina on FIFO and do away with the FIFO. Locals are not benefiting from resources extracted from their land. Mining giants like OK Tedi was not meant for FIFO nor Lihir. I would like to see that Ramu Nickel should also build staff accommodation in Madang to stop FIFO. I am challenging honourable member for Usino Bundi and Raikos (Jimmy Oguro and Gemungo Peter Sapia) voice their concern in the next agreement review if there be.

  2. Richard Jackson

    In some circumstances, FIFO makes sense -where the project site is in a location which is very unlikely ever to attract any other form of economic activity. In other cases, it may be justifiable to build a town although the world is littered with old mining ghost towns. It is worth noting that one of the very few projects that actually built a mining town (Ok Tedi) decided – once it was nationalised – to adopt FIFO.

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