Henzy Yakham | Post Courier | September 12, 2018
The conversation on ownership of natural resources has intensified in recent times with the issue moved from the simmer-back to hot-and the front-burner.
In the forefront and pressing for revolutionary reforms in the resource ownership regime are two of PNG’s founding statesmen – Sir Julius Chan and Sir Mekere Morauta.
Both Sir Julius and Sir Mekere played very significant roles during pre-independence years as architects to craft the foundations of PNG’s currency, banking and financial institutions, which in succeeding years underwent further reforms to improve their service delivery.
Today, the two former prime ministers are calling for changes to the resource ownership laws so that the original inhabitants of land and sea where the natural resources are found have fair and equitable benefits. In November 2013, despite not attending a Madang meeting of governors from maritime provinces due to prior confirmed official engagements, Sir Julius provided a brief paper to his colleagues on the development of PNG’s extractive industries, ownership of natural resources and related issues. Included in the brief was Sir Julius’ stance that land/resource owners’ rights to own natural resources on and under their land and sea as his proposed remedies in the mining industry.
The brief highlighted a number of aspects in which PNG has failed to structure the mining industry for maximum value to PNG and its citizens. With the brief were comparisons of mineral royalty rates of PNG (which are among the lowest in the world), and other countries which include:
Poland: 10 per cent contained metal value
Ghana: 3 -12 per cent sliding with price
Canada: 15 per cent (British Columbia) taxable income; 18 per cent (Ontario) of taxable income 20 per cent; (Quebec) of taxable income
Mozambique: 10 -12 per cent diamond; 5-8 per cent precious metals
Mexico: 8 per cent gold
Botswana: 10 per cent diamonds; 5 per cent precious metals
United States: 12.5 – 16 per cent Oil; 8 – 20 per cent precious metals
Papua New Guinea: 2 per cent gold; 2 per cent copper
Sir Julius maintains that PNG’s mining regime is grossly distorted and unfair because billions of kina are earned, but the real land, and resources owners simply do not realise their fair share of the benefits.
In a nutshell, he has been pushing for among others:
– Royalties raised to 10 per cent f.o.b. annual revenues;
– SSG raised to 10 per cent f.o.b. annual revenues and SSG payments should be made directly from the company to the province;
– Tax Credit raised to 10 per cent of assessable income and funds should be placed in an account the year of eligibility with no time limit on the use of funds;
– The State receive at least 30 per cent equity in all mining projects free of charge, and should convey a significant portion of this equity to the province, the LLG and the landowners;
– Twenty per cent (20 per cent) of all royalties, special support grants, tax credit and dividends from equity holdings be placed in a separate account to be used for development projects in non-mining provinces; and
– The Mining Act 1992 be comprehensively reviewed and amended, specifically such that ownership of all minerals on and below the sea is vested in the province in whose waters minerals are located.
PNG’s Mining Act 1992, states that all minerals existing on, in, or below the surface of any land in PNG, water lying in any land in PNG, are the property of the State. During colonial rule, the mining and petroleum laws of PNG were adopted based on Australian precedents, giving the powers of ownership of resources in the Administrator. Under the common law of England, minerals belong to the owner of the land under which they are found.
The British Common Law, inherited by Australian colonies upon white settlement, included a presumption that the owner of the land is entitled to all that lies above and below the surface.
Natural resources such as minerals were regarded as part of the land in which they naturally occurred and accordingly passed into private ownership upon Crown grant of the land. Despite these arguments, in the end the Australian Statutory Law in place during colonial times prevailed over both PNG law and British Common Law, this was formalised in the Mining Act 1992. However, it is very clear that State ownership violates both traditional PNG law and British Common Law.
In April 2013, Sir Julius told the Parliamentary Referral Committee on Minerals and Energy inquiry into the review of Mining Act 1992 that under current laws, PNG simply gives away all its wealth and then buys it back at an exorbitant price.
On August 19, 2013, Sir Julius was the Keynote Speaker at the Department of Mineral Policy and Geohazards Management (DMPGM) organised regional consultation meetings in Kokopo, East New Britain Province on the proposed changes to Mining Act 1992. There, he outlined the way in which the mining regime in PNG has failed the people and the way it should be changed for the greater benefit of the people and provinces.
On May 14, 2009, Sir Julius proposed reforms in natural resource ownership laws in a motion tabled in Parliament.
The underlying intention of the motion was for the transfer of the resource ownership to landowners of where the resources are found. As well, the motion proposes for increased benefits for landowners, provincial governments and the country in general.
Sir Julius argues that as a direct consequence of the arrogation of all mineral, oil and gas reserves on land and below the land and sea by the State have been a massive give-away of the national wealth of PNG.
On September 4, 2018, Sir Mekere asked Prime Minister Peter O’Neill a series of questions based on important national issues raised by Sir Julius in his reply to the inaugural address of the Governor General in opening this Parliament.
Sir Mekere prefaced his question to Mr O’Neill by quoting Sir Julius “to remember that in our democracy the final power is the power of the people. We are here for one reason only – to serve the people”.
“I want to take a wider view of the challenges we face. For though we have some short-term problems to tackle, I fear there are even more grave problems looming over us.
“I have never known a time when our country was in greater peril.”
After quoting Sir Julius, Sir Mekere asked Mr O’Neill what the government position on Sir Julius’ recommendations among others to:
– Increase the level of royalties from the current 2 per cent to 10 per cent;
– Increase the level of Special Support Grant and the Tax Credit Scheme;
– Establish a Trust Fund in which 20 per cent of revenues of mining provinces would be paid to distribute to non-mining provinces;
– Revise the Mining Act 1992 and the Oil and Gas Act 1998 to vest ownership of resources in the people;
– Introduce a Derivation Grant for mining and petroleum provinces of 5 per cent of the value of resources originating in that province;
– Increase Autonomy of Provinces, provinces “that demonstrate capacity to manage their own affairs. The autonomy was to cover administrative and financial autonomy and autonomy over non-renewable and renewable resources.
Answering Sir Mekere’s questions, Mr O’Neill said “the Mining Act is under review at present and I will not pre-empt the discussions and the outcomes of that review that is taking place.
“The Mining Minister and his team are already well advanced in those discussions. There will be an opportunity for this Parliament to look through that review and the new Mining Act, which will address all these issues, including royalties, the powers of the provinces with respect to the mining activities in those provinces and the management of the trust funds.
“There has been a gross abuse in the management of some of the trust funds and we are all aware and are trying to correct that as we move forward.
“I can assure you, that the people of Papua New Guinea, particularly the landowners will get a better share of the benefits of the resource development in this country.
“That is the priority of this government and we will continue to pursue it through the mining review which is now being conducted and is still continuing.”