Tag Archives: EITI

Wafi-Golpu Could Be First To Incorporate EITI Provisions

Matthew Vari | Post Courier | November 30, 2018

The Wafi-Golpu Mine is set to be the very first gold project to incorporate the Extractive Industries Transparency Initiative provisions included in the agreements for the Wafi-Golpu Joint Venture projects set for the Morobe province.
PNG EITI National Secretariat head Lukas Alkan said this early this month when commenting on the push by government and the PNG EITI secretariat to ensure the initiative is rooted in current and future project prospects to ensure effective transparency on revenues in the extractive sector.
“Some of these projects are new projects where the forums are being conducted like Wafi-Golpu and the Freida River.
“The transparency mechanism has been, we are trying to build into those agreements. We started off with Wafi-Golpu project.
“The MoA negotiation that is ongoing there is a provisions there for EITI for reporting purposes in terms of disclosing project agreements,” Mr Alkan said.
He said the secretariat was also looking at the reviews being conducted with Pogera and the other mines.
“We also look at ensuring that transparency mechanisms are built into those revised agreements.
“This is the first time that we are trying to tie in the EITI mechanism into a project that is yet to start.
He said, on the same token, project agreements that have already been signed, the secretariat continues to have difficulties getting disclosure.
“The need for work on certain legislations and the requirements that prevent bodies such as EITI from having access will need to be done in order to have access,” Mr Alkan said.
A learning curve the secretariat will ensure the country maintain transparency with the country’s new major projects earmarked within the next decade.
“This time around we have been proactive to ensure that when the new project is coming on-stream we are making sure that EITI mechanisms are built into those MoAs or agreements so that triggers the disclosure of the agreements when they are signed,” he said.

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Industry to reveal real owners of mining companies by 2020

The National aka The Loggers Times | October 30, 2018

Papua New Guinea is set to reveal real owners of extractive companies.

This comes after the conclusion of an Extractive Industries Transparency Initiative (EITI) roadshow on beneficial ownership disclosure in Madang recently.

A beneficial owner in respect of a company means the natural person(s) who directly or indirectly owns or controls a corporate entity.

A beneficial owner is always the living, breathing human being who ultimately profits from the company’s activities, or controls the company’s activities. It is never a company, other legal entity, or a nominee/proxy.

A roadmap is being executed by KPMG – the roadmap implementation manager – to develop a reporting matrix to feature beneficial owners in PNGEITI reports starting 2020, as required by the EITI global standard.

Head of National Secretariat of EITI Lucas Alkan said: “By 2020, companies applying for or holding a participatory interest in an exploration or production of an oil, gas or mining license or contract in an EITI country must report the details of the beneficial owner, (ie the human beings who own, control or substantially benefit from these companies and interests), as well as identifying any ‘politically exposed persons’ with a direct engagement in regulating, setting laws, tax rates, negotiating contracts etc.

“More than 50 EITI member countries have published their plans for how to disclose the real owners of companies in their extractive industries, which will require establishing legal and institutional arrangements for application, including establishing registers of such real owners.

“The Madang roadshow was part of implementation of a BO roadmap to identify an appropriate reporting process to enable PNGEITI name beneficial owners in its reports.

“We had presentations from Mineral Resources Authority, Department of Petroleum, Bank of Papua New Guinea, Investment Promotion Authority, PNGEITI National Secretariat, Institute of National Affairs and the BO Roadmap Implementation Manager KPMG.

“I commend the MSG constituents and other relevant State agencies for their presentations and discussions on issues relating to revealing beneficial owners in EITI reports and the approach going forward.

“As required by the EITI global best practice standard – to report the ‘beneficial owners’ in 2020 like other EITI implementing countries – I am positive that PNG will have been fully prepared by then to meet this important reporting requirement.”

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Owners Of Extractive Companies To Be Identified

Post courier | 10 July 2018

Work is underway to identify beneficial owners of extractive companies operating in Papua New Guinea, says the PNGEITI multi stakeholder group (MSG).

The PNGEITI is cooperating with an international auditing firm KPMG as the implementation manager to execute a beneficial owners (BO) roadmap.

The roadmap is aimed at establishing a reporting matrix to feature beneficial owners in PNGEITI reports starting 2020- as required by the EITI International.

A beneficial owner in respect of a company means the natural person or persons who directly or indirectly owns or controls a corporate entity. A beneficial owner ultimately profits from the company’s activities, or controls the company’s activities. It is never a company, other legal entity, or a nominee or proxy, says PNGEITI.

“By 2020 companies applying for or holding a participatory interest in an exploration or production of an oil, gas or mining licence or contract in an EITI country must report the details of the beneficial owner (persons who own, control or substantially benefit from these companies and interests), as well as identifying any ‘politically exposed persons’ – these are politicians or officials or their family members or agents, with a direct engagement in regulating, setting laws, tax rates, negotiating contracts etc.”

“More than 50 EITI member countries have published their plans for how to disclose the real owners of companies in their extractive industries, which will require establishing legal and institutions arrangements for application, including establishing registers of such real owners,” said PNGEITI head of National Secretariat Mr Lucas Alkan.

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PNG Sweats On Meeting EITI Global Reporting Standards

Lucas Alkan and the 2016 EITI Report

Post Courier | May 1, 2018

Officials from the Extractive Industry Transparency Initiative (EITI) International Secretariat in Norway will be in the country today to begin a week-long consultation with relevant stakeholders for Papua New Guinea’s EITI validation.

PNGEITI head of National Secretariat Lucas Alkan said the officials will meet and consult with government agencies, extractive companies, civil society organisations, journalist and academics to gauge their feedbacks on EITI implementation to prepare PNG’s Validation report.

Mr Alkan said, “The purpose of validation is to drive reforms in the extractive sector, access performance and promote dialogue, identify opportunities to increase the impact of EITI implementation, identify opportunities for mainstreaming EITI implementation in government systems and safeguard the integrity of the EITI.

The validation will determine whether PNG has made meaningful progress in implementing EITI global reporting standards or have little or no progress at all.

“On behalf of the members of the PNGEITI multi stakeholder group and its chair Charles Abel, I am happy we have made progress in terms of inducing reforms either directly or indirectly through the EITI process,” Mr Alkan said.

Other government initiative such as the review of the Infrastructure Tax Credit Scheme and the Department of Finance review of Government trust accounts goes hand in hand with PNGEITI recommendations.

“These are the progresses so far and we want to see more done to bring about global best practices into the mining and petroleum sector for better management and use of revenues derived by the sector.

“Our desire for EITI in Papua New Guinea is long term- to making sure that EITI serves a useful function in the extractive dependent PNG economy,” Mr Alkan said.

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Transparency Initiative report calls for improved systems in extractive sector in Papua New Guinea

Sources of revenue from extractive sector to government. Source: EITI

Business Advantage | EMTV | 4 April 2018

The 2016 Papua New Guinea Extractive Industries Transparency Initiative report has found that improvements are being made to registry and payment systems in Papua New Guinea, but more needs to be done. It notes that budgeting for government revenues remains difficult because of the resources industry’s volatility, and the relatively small number of companies paying full tax.

The EITI report, which is produced by Ernst & Young, says that ‘in some cases, the absence of a robust system for managing government revenue payments in PNG leaves the system vulnerable to fraud, corruption, and human error.’

It found that the problem of transparency is amplified when payments to sub-national [provincial and district] governments are taken into consideration, noting that the Asian Development Bank has called for greater transparency in sub-national government resource revenue flows.

Budgeting

Budgeting for government revenues, the report says, from the extractive sector is ‘complex due to the revenue being subject to fluctuations in quantities produced and global commodity prices’.

A further issue is the high number of extractive companies that have some form of tax exemption.

‘Medium-term projections anticipate that corporate income tax (mining and petroleum tax) will come mainly from Ok Tedi, Porgera and the oil fields.

‘The Ramu Nico mine has a 10-year exemption from corporate income tax. The Lihir mine continues to undertake high capital expenditures which reduce its taxable income.

‘Low LNG prices, together with an accelerated depreciation allowance, means there may not be corporate income tax from the PNG LNG project.

‘In addition, key mines are claiming Infrastructure Tax Credits (ITCs).’

PNG oil and gas production. Source: EITI

Recommendations

The EITI report makes a number of recommendations. One was the implementation of a reliable electronic registry system to supersede the current paper ledger system.

The report noted that scanning of all documents has begun, but it will require additional resources to adhere to the EITI Standard.

‘The Department of Petroleum and Energy will need to provide information regarding licences awarded and transferred in previous reporting periods.’

Another recommendation has been that the Mineral Resources Development Company (MRDC) reports on the equity distribution and all other funds it holds in trust and invests for the landowners and for future generations.

It notes that there has been better information on payments and receipts, especially from the MRDC.

Making electronic payments, rather than using cash or cheques, is identified as a priority. The lack of a ‘robust system for managing resource payments leaves the system vulnerable to fraud, corruption and human error,’ the report says.

‘There were specific financial instructions from the Finance Minister for government agencies to heed this change and transition into electronic payments system where possible.’

Two other areas of focus are improving reporting on sub-national payments and ensuring that Memorandums of Understanding (MOAs) are made public.

Positive prospects

The EITI report says the medium-term economic outlook for PNG ‘remains positive, with foreign investments in the pipeline’.

It anticipates 2.8 per cent GDP growth in 2018, pointing to:

  • A gradual pick-up in the global economy, which is expected to boost commodity prices and stimulate activity in sectors outside resource extraction.
  • Increased output in mining.
  • Forecast growth in agriculture, forestry and fishery output of 3 per cent, with increases in both price and production.
  • PNG’s hosting of the Asia-Pacific Economic Cooperation Leaders’ Meeting in 2018.
  • Legislative changes introduced on 1 January 2017 on taxation of the extractive sector.

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EITI Report Launched

Mathew Vari | Post Courier | March 19, 2018

The PNG Extractive Industries Transparency Initiative (EITI) national secretariat launched its 2016 and 2015 reports last Friday.
Treasury Minister Charles Abel was on hand to launch both reports as the head of the secretariat Lucas Alkan delivered the progress of the country to the global initiative.
In launching its fourth report, Alkan said the Multi Stakeholder Group (MSG) agreed to publish the reports together as both reports will be used by the EITI International Secretariat to assess PNG’s progress in implementation the initiative in the country.
“EITI International started taking this thing up to make sure that companies that are operating in the countries we should know who is the owner, the shareholders, these are the things that EITI international has made a requirement for us to take on board as an implementing country,” Mr Alkan said.
“We are also conducting sub national payments. We have been concentrating at a national level of payments and transfers taking place.
“But we are all aware that a lot of the transactions happen down the line past the national level to provincial local and district resource revenues so we need to put some light into what is happening, accountability, transparency got onboard,” he said.
The PNG EITI national secretariat was established NEC when PNG applied for membership 2014 and the international secretariat accepted the country as a candidate.
“The reports have been covering the revenue streams and reporting entities. Reporting revenue streams like corporate income tax, group tax, mining and petroleum tax all these things are being reported in this reports.
“We are reporting on companies that are in production and exporting these commodities and not exploration activities.
“There is a section on legal framework and fiscal regimes tax arrangements and taxation legislation governing the extractive sector activities in the country management and distribution of revenues, how the money from the resource sector gets into the budget.”
Mr Alkan said the documents are not just reports but need to be translated to actual reforms that matter to the country as far as transparency, accountability and governance is concerned.

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PNGEITI Welcomes Decision On Tax Credit Scheme

Post Courier | February 1, 2018

The Papua New Guinea Extractive Industries Transparency Initiative (PNGEITI) has welcomed the government’s decision to put on hold Tax Credit Scheme (TCS).
Prime Minster Peter O’Neill told business leaders some companies failed to execute TCS properly.
Mr O’Neill said the government decided to put a stop to it, because there is a transparency issue with the process.
Head of PNGEITI National Secretariat Lucas Alkan when concurring with the idea that the TCS is a best public private partnership (PPP), said the opaque nature of the scheme had to be addressed by reviewing the processes involved in awarding tax credit to companies.
Mr Alkan said successive EITI reports have found discrepancies in the reporting of the tax value foregone and it was timely that the government looks into it to take remedial actions.
“We welcome the decision of the Government to put on hold TCS projects as EITI reports affirm the observation that there is lack of transparency and accountability in this scheme.
“The process needs to be more transparent -particularly the guidelines and the criteria involved in the approval process.
The ITC expenditure should be included in the annual national budget books and the Department of National Planning and Monitoring (DNPM), should be able to show this information,” he said.
Mr Alkan said the PNGEITI Report for 2016 fiscal year published recently included the ITC as one of the recommendations for the government to increase transparency and accountability regarding the approval process by DNPM, expended on projects by companies and resulting tax payments offset by the IRC. “We trust the national government will address the opaque nature of this scheme so that original intent of TCS is maintained. “We applaud the Prime Minister for the insight and look forward to a review of the TCS,” he said.

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