The Mining Industry loves to tell us how much it contributes to Gross Domestic Product and Export Earnings and falsely links these two metrics to our development goals (see a typical story below).
GDP and Export Earnings are two false gods that absolutely do not reflect the quality of life or standards of living for ordinary people. GDP and Export Earnings can be soaring while ordinary citizens are plunging deeper and deeper into poverty.
GDP and Export Earnings simply tell us how much money the mining industry is stealing every year.
GDP is the monetary value of all the goods and services produced in the country:
- GDP is NOT a measure of the standard of living or quality of life.
- GDP ignores ‘externalities’ like pollution, environmental damage, social costs etc
- GDP ignores where the wealth ends up and how it is distributed
- GDP ignores access to basic services like health and education
- GDP ignores where the value comes from – a country selling off all its assets will have a high GDP until all its assets are sold, it will then be bankrupt!
- GDP ignores the costs of government debt – a country borrowing lots of money to fund its spending may have a high GDP until it goes bankrupt.
What the mining industry never talks about is how much tax it pays to the government, maybe because recent analysis shows mine workers in PNG pay more tax than the mining companies!
LOOP PNG | August 20, 2018
The mining and petroleum resource industry continues to be a key contributor to Papua New Guinea’s development goals, says the PNG Chamber of Mines and Petroleum.
The industry contributed over 26 percent of PNG’s Gross Domestic Product and around 80 percent of the nation’s export revenue valued at K23 billion (approximately US$7.3 billion) as of September 2017.
The industry also directly employs over 20,000 people, with significantly more working in other sectors dependent on the industry, including landowner businesses.
“The resources industry has underpinned the PNG economy for decades, providing considerable social and economic benefits that have owed to the government and the people of PNG,” says Gerea Aopi, President of the PNG Chamber of Mines and Petroleum.
“It continues to be a key contributor to PNG’s development goals, investing millions of Kina in community development in sectors such as health and education, infrastructure including roads and airstrips, employment and training, and agriculture and livelihood programs.”
The Chamber highlighted how the industry establishes and supports landowner companies and other PNG- based businesses that provide services to the project sites such as transportation, labour hire, catering, security, earthmoving, freight and logistics, janitorial services, agriculture and livestock and livelihood programs to promote food security and agribusiness.
Aopi says stable government policies and a favourable investment climate are critical for future growth in the PNG resource sector, and that the proposed changes to the Mining Act would undermine PNG’s investment attractiveness.
“While we support the PNG Government’s prerogative to update the legislation to meet the challenges of the 21st century, some of the amendments would pose significant deterrents for investment in future mining projects and would be a serious impediment to the operation of current mines in PNG,” said Aopi.
“When investors assess the investment risk and return potential of a country, they look at the legislative and policy framework as well as the total cost of doing business, including the levels of existing infrastructure to support a project. This calculation includes mining legislation, as well as taxation, scal and other policies. Considering this whole package, PNG has a high total government ‘take’ when compared to other countries.
“Independent modelling has shown that whilst PNG royalties in isolation might not be as high as other jurisdictions, the total take when including all taxes – including royalties, corporate tax, state equity and dividend withholding tax – is at the higher end of most countries. This is combined with a very low score on the World Bank’s Ease of Doing Business scale,” he added.
The Chamber continues to encourage the Government to undertake an independent review of the amendments, as envisaged in the 100 Day Plan, to ensure full understanding of the economic implications of the revised Act on the economy of PNG.
Significant growth potential
The Chamber believes there is huge potential for further development opportunities in the mining and petroleum sectors in the next three to five years, delivering benefits to the people of PNG, but these will not proceed unless investors are confident of the legal, scal and regulatory environment in PNG.
“The Chamber is committed to supporting internationally competitive legislation that ensures modern regulation of the industry, whilst encouraging and maintaining investment,” said Aopi.
“We want to work with the government to achieve a legislative framework that will not only meet the needs of PNG, but will also continue to encourage active investment in the sector.”