Tag Archives: Papua New Guinea

Sovereign Wealth Fund Is Our Security

Barney Orere | Post Courier | August 22, 2017

Concepts such as Dutch Disease are risks that threaten macroeconomic stability and consequently the long term development of the economy. This requires a forceful and comprehensive response from Government at all levels.

Given the fact that there is heavy dependence on the non-renewable sector; that is, petroleum and minerals, the current generation arguably has clear obligations to ensure that the benefits from their exploitation is available to generations that will come later.

Of importance will be the manner in which the State manages the increase in economic activity and resulting fiscal flows. The implementation of large scale projects such as the PNG LNG in a small economy such as PNG poses considerable challenge in terms of macroeconomic management also.

To minimize the potential negative impact of the considerable increase in financial flows and economic activity on the national economy, the Government policy was to ensure that a Sovereign Wealth Fund structure was implemented in the lead-up to increase in fiscal flows.

A Government submission says that whilst PNG LNG Project forms the backdrop of the implementation of Sovereign Wealth Fund (SWF) in PNG, it was to be expected that the SWF, upon establishment, was likely to be the recipient of financial flows from a range of projects or sources.

The submission which had its cover page removed was found in a warehouse quite by chance. Although some progress could have been made on the SWF, the lack of conversation has prompted the matter to be brought out into the open and there are insights which, hopefully, will get the conversation going.

The idea behind a Sovereign Wealth Fund (SWF) was to secure PNG’s future by putting away savings from major resource projects. Parliament passed the enabling law and five years later conversation on SWF needs to come out stronger.

Time has become of profound essence because earnings from PNG LNG will be flowing in a less than three years from now and without a SWF in place, where will we put the money?

The country is at a critical crossroad because without a management mechanism in place, the synergy effects of vast earnings in a small economy will be the cocktail for the dreaded Dutch disease.

What is more troubling than ever is the lucrative nature of SWF; the nation’s future security will need to be conducted at the most highest level of integrity and that means transparency and accountability. Hopefully this isn’t one of our greatest obstacles because we mess it up now and there’s nothing for future generations.

On February 22, 2012, Parliament passed the Organic Law on the Sovereign Wealth Fund; a high profile initiative that has the potential to be a significant contributor to the welfare of the people, stability and growth of the Independent State of Papua New Guinea for generations to come.

The statutory objectives of Sovereign Wealth Fund are:-

  • TO support macroeconomic stabilization,
  • TO support the development objectives of the Government, including long-term economic and social development, and,
  • TO support asset management in relation to assets accrued from natural resource revenue.

The SWF was to consist of:-

(a) A Stabilisation Fund, to manage the impact of fluctuation of mineral and petroleum revenues on the economy and on the national budget, and,

(b) A Development Fund, to provide definite and ongoing funding for economic and social development in accordance with the development plans of the Government.

The author/s of the submission noted that the organic Law on Sovereign Wealth Fund creates the following stakeholders to be involved in running the SWF:-

  • SWF Board to oversee the SWF (Section 16 of the Organic Law on SWF)
  • Minister responsible for Treasury matters to determine the investment mandate for the SWF board and receive and consider reports from the board (section 6),
  • SWF Appointment Committee to appoint members of the SWF board (section 22)
  • Independent Probity Auditor to consider probity issues associated with the operation of the SWF (section 39), and ,
  • Secretariat to assist with the operational aspects of the SWF (section 31).

Certain matters regarding the composition, functions and governance of each of these stakeholders are set out in the Organic Law. However, details of how these stakeholders will manage the SWF and interact with each other have not been fully provided for in the Organic Law.

Section 42 of the Organic law provides for regulations to be passed in future which are necessary to give effect to the Organic Law on SWF.

The submission recommended that in advance of the start of revenues being ready for deposit, the National Executive Council should take action to implement the Organic Law on SWF with the view to ensuring that it was fully operational prior to operations starting at the PNG LNG Project. To this end a working committee was suggested to take charge of implementing the Organic Law.

PNG has already made dozens of LNG shipments.

When the Post-Courier raised the dangers of Dutch disease in a feature, Treasury Secretary, Dairy Vele made a statement a day or two later, that tax revenue from the PNG LNG Project would not be seen until 2020 (or thereabouts). He took the trouble of explaining how complicated the project was and made no mention of proceeds from any shares that might be held in the project; only the tax component.

PNG borrowed about K14 billion to get the PNG LNG Project off the ground.

When Prime Minister Peter O’Neill took office after the 2012 General Election, he spoke of starting the Sovereign Wealth Fund but the conversation gradually faded as he got embroiled in the tussle over the Independent Commission Against Corruption and other legal squabbles that confronted him.

The aim of the Organic Law on SWF was the establishment of the appropriate structures for the management of PNG’s increased resource wealth.

We see now from the submission that we’re dealing with a very lucrative organization. But it is the decisions that will be made that will protect the future of PNG.

With the earnings from the PNG LNG coming up, as indicated by the Treasury, work on SWF must begin because there are still some outstanding bits and pieces to attend to. Time is of essence because this is the entry point for Dutch Disease to set in. We will have so much money to throw around we will wreak havoc in our small economy; that is the danger.

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Benefits Delivery From PNG LNG Must Improve

Oil Search Managing Director Peter Botten Has Called For An Improvement On The Disbursement Of Funds Owed To Landowners Of The PNG LNG Project

Post Courier | August 21, 2017

Oil Search managing director Peter Botten has called for an improvement on the disbursement of funds owed to landowners of the PNG LNG project.

The calls are in light of the ongoing debate pertaining to the benefits being derived from the oil and gas business.

Speaking at a business breakfast last week hosted by the Business Council of Papua New Guinea (BCPNG), Mr Botten told business and government leaders including the Prime Minister Peter O’Neill, that he believed there is a broad feeling that the recent developments have delivered little over the last few years.

“Benefits delivery from PNG LNG must improve. Landowners must be paid.

“The money is there, some have already been paid but barriers to revenue distribution must be removed,” he said.

“Over K3billion has been paid by the project in royalties, development levies and equity distributions to the State and landowners since 2014.

“Maybe not as much as some people expected but still it’s a considerable sum,” the managing director said.
Prior to these statements, Mr Botten had told the business and government leaders that with the right environment oil and gas production can more than double over the next five to seven years.

“Potential investment over K60billion in developments, appraisal and exploration are possible in this time frame. Construction can lead to over 20,000 new jobs with significant other spin off economic activities,” he said.

However he stressed there were many issues to resolve to make this happen.

He said a prerequisite to success is developers engaging with government, landowners and indeed the whole country to demonstrate fair value distribution for all parties must be achieved from existing projects.

“One that people feel is right value for resources extracted, one where developers work with state to deliver infrastructure address service delivery and support both economic and social development of the country,” Mr Botten said.

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All that glitters is profit in China’s gold mines as demand for safe haven boost precious metal sales

All that glitters is profit in China’s gold mines as demand for safe haven boost precious metal sales

Zijin Mining’s first-half profit almost triples as Zhaojin Mining’s profit grows 56 per cent.

Enoch Yiu | South China Post | Sunday, 20 August, 2017

Zijin Mining Group and Zhaojin Mining Industry, among two of the Chinese gold industry’s leading miners, reported bumper interim profits, bolstered by surging gold prices amid rising global demand for safe haven investments, and increasing ales at home.

Zijin’s net profit almost tripled to 1.5 billion yuan (US$224.8 million), or 0.069 yuan per share, in the first six months of the year. Zhaojin’s net income rose 56 per cent to 396.64 million yuan, or 0.13 yuan per share, in the same period.

“Hedging demand triggered by political uncertainty became the main driver of the periodical increases in gold price” in the first half, Zhaojin’s chairman Weng Zhanbin said in a statement to the Hong Kong stock exchange.

The improving earnings underscore how an 8 per cent rise in the global price of gold in the first six months of the year has lifted the fortunes of Chinese miners. Earnings were also bolstered by China’s increasing appetite for the precious metal, both as a safe haven investment and as collectible, with the industry’s sales rising 10 per cent to 545 tonnes during the period.

“Mining segment delivered promising results, with the production volume of gold, copper, zinc and other key metals continuing to lead the industry,” said Zijin Mining chairman Chen Jinghe said in the result statement.

Zijin operates mines in nine overseas countries, extracting silver, zinc and copper. Among them, copper production increased 10 per cent while zinc production rose 8.6 per cent.

“During the reporting period, the company’s overseas projects maintained a good trend of development. The outputs of the Porgera gold mine in Papua New Guinea, the Jilau/Taror gold mine in Tajikistan, and the zinc and multi-metals mine in Tuva, Russia increased,” Chen added.

“ In the second half of 2017, developed economies such as Europe and the United States are expected to stabilise and gradually recover, while the Chinese economy will remain stable and sustain a positive trend, the results of supply-side reform will begin to emerge, and the cyclical consolidation of bulk commodities has probably completed,” Chen said.

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Self interested foreign mining industry threatens and bullies new MPs

Peter Aitsi addresses the new MPs

Proposed amendments must not affect revenue: Chamber

Cedric Patjole | PNG Loop | August 20, 2017

Members of Parliament have been informed that proposed amendments to the mining act must not affect investors’ confidence in the country.

PNG country manager for Newcrest Mining Limited and vice-president of the PNG Chamber of Mining and Petroleum, Peter Aitsi, recently told new MPs that regulatory frameworks that are detrimental to investment will have a direct impact on revenue streams for the country.

The comments were made during the National Parliament Induction Programme.

Speaking to recently elected MPs, Aitsi said they needed to be aware of the delicate correlation between PNG remaining an investment destination as well as regulations introduced for the country.

He said this when stressing how signi cant revenue streams from the mining sector contributed to the country’s purse.

“As new members of parliament, you have to be very aware of that sensitive relationship between ensuring that PNG remains an attractive investment destination, and the aspirations of our nation in terms of our legal frameworks that we develop.

“Because a change that is detrimental to investment will have a direct impact in those revenue streams. So you need to be very much aware of that,” said Aitsi.

Aitsi’s comments come in light of the proposed amendments to the Mining Act which the Chamber has continually emphasised must not scare investors away.

To drive home the importance of the mining sector, Aitsi revealed that the industry contributed 10 percent to the country’s total revenue, with personal income tax (PIT) the major contributor with just over 20 percent.

He said so not only did the state receive revenue through mineral production tax and dividends, but through employment from PIT.

“This means we need to sustain employment in order to receive the kind of revenue to look after our country and growing demand.

“What we’re promoting in terms of our regulatory framework, our fiscal regime and our regulatory must be attractive to global market,” Aitsi said.

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B’ville ex-combatants threaten violence against Panguna family

Photo: Leonard (far left) and other family members under threat

Leonard Fong Roka | PNG Attitude | 17 August, 2017

IT was reminiscent of the event in which our father was killed by the Bougainville Revolutionary Army on 18 March 1993 during the peak of the Bougainville conflict.

On that day, armed men located themselves at the assassination scene and lied to someone they met and told him to call our father to the scene of his death.

On this occasion, Panguna New Generation Leaders tricked someone to call us to a place for something good but when we reached it, dozens of men appeared and began intimidating us. A number were under the influence of liquor.

Panguna New Generation Leaders consists of former BRA men who are aggressively campaigning for the re-opening of the Panguna mine with funding from the Panguna Negotiations Office of the Autonomous Bougainville Government (ABG).

The threats have been continuing for almost three weeks.

The crisis sprouted from a belief that “where the population is illiterate, the literate cannot move an inch”. The Roka family was acting in a capacity that we should do something for the government instead of waiting for the government to do something for us.

One of my sisters is a member of Melanesian Indigenous Land Defense Alliance (MILDA), formed in 1997 at Madang to advocate for the freedom of the West Papuans and on other critical issues affecting Melanesia.

MILDA had its last conference in Solomon Islands. My sister attended and saw the need for MILDA input to the Bougainville referendum.

MILDA saw that the PNG government had great influence on the Bougainville Peace Agreement, which is still a problem the ABG is dealing with. The PNG government does not respect the peace agreement by complying with its commitments.

The MILDA conference for Bougainville was to be held in the Panguna District from 14-18 August. The aim was for MILDA to listen to the locals express their needs for the coming referendum and to start supporting Bougainville in lobbying for support within the Melanesian states.

MILDA also sees that Bougainville should have a seat in the Melanesian Spearhead Group and alongside other Pacific organisations but has not reached this point yet.

But, according to Panguna New Generation Leaders, the Roka family with MILDA was interfering with the ongoing re-opening of Panguna mine.

Its leaders Henry Pipino, Junior Itamari and community government officer Francis Nasinui said at their first meeting with us that they had won the hearts of all ex-combatants in Bougainville and the Rokas were here to destroy that effort and the future of Bougainville.

They claimed the Rokas do not have respect for their authority despite us showing them the documents of approval from the ABG and other authorities. They said we are showing off with our university degrees and destroying the Panguna people.

Then they ordered the MILDA officials who were here from New Caledonia, Fiji, Vanuatu, Solomon Islands and PNG to depart Panguna.

They said they had prepared excavators to block MILDA and Roka family access to Arawa if they continued their conference in Panguna.

They also said they would smash the Rokas and any local community members and women’s groups supporting us.

They said former Panguna combatants are fighters and do not fear and will not hesitate to destroy anybody that sabotages the Panguna re-opening.

The MILDA conference for Bougainville was not terminated, however, people who wanted to listen to what our fellow islanders had to say about the Bougainville referendum moved it to Arawa where it progressed away from some of the most politically confused people of Bougainville.

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ABG Chief Secretary petitioned to vacate office

Eric Tamaan & Luke Lalu | NBC News via PNG Facts | 16 August 2017

The Chief Secretary of the Autonomous Bougainville Government, Joseph Nobetau has been given 48 hours by the North Bougainville Ex-Combatants, to resign and vacate the office.

This notice was given yesterday and was amongst their demands in a 3-page-signed-petition presented through an ABG official because Mr Nobetau was not present.

According to NBC News,  their protest was over the conduct of the ABG Chief Secretary, citing instability caused by biased decisions portraying nepotism and regionalism.

The ABG Chief Auditor, Peter Tsiperau, has also been given 48 hours to produce overdue audit reports on funds spent in the name of development projects, some of which have never got off the ground.

The ex-combatants are demanding that these audit reports be presented to the Ombudsman Commission, on Friday August 18.

ABG President, John Momis is aware of the move taken by the ex-combatants.

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PNG landowners threaten to shut down mine

Eastern Highlands, Papua New Guinea. Photo: RNZI / Annell Husband

Radio New Zealand | 17 August 2017

Traditional landowners in Papua New Guinea’s Eastern Highlands province say they want to shut down operations at the K92 mine because a memorandum of understanding has not been adhered to.

Over the weekend 200 landowners agreed in principle to shut down operations at the Mt Kora mine as the company had failed to do things like awarding a contract to the landowner company, the Balimoia Development Corporation, or fund a variety of community projects.

The Post Courier reported the chair of the Balimoia Interim Landowner Association, Neneti Tesai, saying all parties would have to go back to the drawing board to revise the MOU and press the developer to meet its obligations.

Neneti Tesai said the landowners made it clear operations could continue at the mine after the MOU was modified and accepted by all parties.

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