Tag Archives: PNG development

‘PNG is on the cusp of a super cycle in mining investment’

Illustrator: Holly Wales

Dr Kishti Sen* | ANZ | 20 April 2018

Papua New Guinea’s real gross domestic product averaged around 2 per cent per annum in 2016 and 2017.

This is a significant step down from the previous two years when growth averaged over 10 per cent thanks mostly to the sizeable liquefied natural gas (LNG) exports. These benefits have now largely faded.

Recently released ANZ research expects growth to remain subdued in 2018 and 2019 as the benefits of the LNG expansion diminishes and as non-mining sectors struggle owing to an overvalued currency and foreign exchange shortages. 

Infrastructure investment associated with the upcoming APEC meeting and higher agriculture output should be the main drivers of activity in the short term.

The national budget is in deficit with debt already at 32 per cent of gross domestic product (just 3 per cent below the self-imposed limit of 35 per cent) and the government is limited in its ability to support the economy.

However, PNG’s longer-term prospects are more encouraging as it would appear to be on the cusp of a ‘super cycle’ in resources investment, particularly in gas, gold and copper projects.

The challenge for the government and business is to manage the next upturn so that a boom-bust cycle is minimised.

Meanwhile, the Kina remains an overvalued currency and better macro balance could be achieved if faster depreciation occurred.

The currency’s fair value on our estimate is around $US0.23-0.25.

At this level, the Kina would likely remove uncertainty in the foreign exchange market, add liquidity and help clear the backlog of import orders, maximise import substitution and assist Kina-exposed industries including agriculture and mining.

*Dr Kishti Sen is an international economist at ANZ

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Barrick Calls For State Intervention in Porgera

Women search for gold downstream from the Porgera mine

After more than 25 years of mining by international companies, local people are still waiting to see the promised development benefits. They are becoming increasingly frustrated and desperate…

Post Courier | April 16, 2018

Barrick (Niugini) Limited , operator of the Porgera Mine in Enga, reported that operations in the Porgera open pit were temporarily suspended last week after a violent confrontation broke out between groups of illegal miners.

The company reported that mining operations in the open pit were suspended at around midnight, after two large groups of aggressive illegal miners, including some armed with firearms, began a violent confrontation near the stage 5C area of the open pit mine.

The fighting between the groups continued until about 2:30am on Tuesday morning.

BNL executive managing director, Richmond Fenn, confirmed that while all Porgera mine employees and contractors are safe and no injuries have been reported, the confrontation was a dangerous escalation of recent violent behaviour among illegal miners, due to the use of firearms by the opposing groups.

“More than 18 shots were fired by these people over a period of about two hours,” Mr Fenn said.

“While at this stage we have not confirmed whether there have been any casualties among the illegal miners from this latest outbreak of violence, the fact that violent people are engaging in gun battles on the mine’s open pit is of critical concern, and we are calling on State authorities to provide urgent assistance in bringing this under control,” Mr Fenn said.

“It is simply unacceptable that these criminals believe they can behave in this way with impunity,” Mr Fenn said.

“Mining operations in the Open Pit have resumed, but this escalation of violence needs to be stopped before someone is killed or injured.

“We have advised the relevant authorities about the situation, and will be working closely with the police and others in responding to this latest outbreak of violence,” Mr Fenn said.

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Royalty Issue Leads To Porgera Shoot-Out

Porgera mine. Photo: wikicommons / Richard Farbellini

Jeffrey Elapa | Post Courier | April 12, 2018

The recent incident of armed illegal miners shootout with mine security guards is a result of landowner benefits, local landowner leaders from Porgera claimed.

A chief and community leader Ekale Kangalia said the recent shootout between armed illegal miners and company securities is a result of the stop on the royalty payments since 2014.

He said the cashflow in the area was sustained by the royalties from the Porgera gold mine until infighting in the Porgera Special Purpose Authority (PDA) led to the closure of the account.

Mr Kangalia said after years of frustration, the locals resorted to accessing the mine pit to venture for gold to sell and earn money to support themselves and their families.

He said the PDA directors’ infighting has forced them to go to the courts to obtain a court order to stop the royalty payments to the landowners.

Mr Kangalia claimed the PDA is a government sectioned body that comes under the Porgera Paiala Local Level Government Council and had nothing to do with the landowner royalty.

“This is unnecessary court orders when there is nothing to do with the directorship of the board of PDA. A royalty is an undisputed benefit to the landowners. Something has to be done to allow the people to benefit from their rightful benefits to put a stop to illegal mining as the only means of cash flow has been stopped by the court.

“Their only benefit is being stopped so the people have no other option but get into the mine and look for gold,” he said.

Mr Kangalia is calling on Barrick Niugini Limited and the National Government to look at ways to allow the people to receive their benefit as matter of importance.

He said the recent incident of armed conflict must not be taken lightly.

“We must know that the landowners are entering into the mine pit armed with high powered weapons to look for gold is the first time since the start of the mine. They have been supportive of the company but they can’t wait anymore so they went in to look for money,” he said.

Barrick Niugini Limited management also confirmed shutting down of the mine pit operations after the shootout with armed men.

Porgera Landowners Association chairman Tony Mark Ekepa when contacted confirmed the incident.

He said the stop payment on the royalties is now before a three-men Supreme Court.

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Aggrieved landowners say they are missing out on Ramu mine benefits

Post Courier | April 6, 2018

The RAMU Nickel Project has life span of over 35 years, according to project developer Ramu NiCo Limited.
And with exploration continuing, the project life’s span could even increase, vice president of Ramu NiCo Management (MCC) Limited, Wang Baowen said on Wednesday when addressing aggrieved landowners at Mindre village.
Mr Wang was accompanied Mineral Resources Authority cheif executive officer Philip Samar, MRA senior officers and a legal officer from the Investment Promotion Authority.
Mr Wang was addressing aggrieved landowners who petitioned the Government and the developer over what they claimed were missed business opportunities, compensation payments, royalties and environmental issues.
Certain community leaders alleged at the gathering that minerals were being shipped out of the country in ship loads after ship loads and they were suspicious that the mine life of the project was coming to its end soon.
However, Ramu NiCo Community affairs manager Albert Tobe said such stories that are being speculated were not true.
Mr Wang said that initially the mine’s life-span was about 25 years, however, with recent exploration and discoveries of ore up at the Kurumbukari plateau, the mine life may extend to over 30 years.
He told landowners of Basamuk that the developer is also a local company with interests of landowners, State and the province at heart.
“Am very clear regarding your concerns on business opportunities,” Mr Wang said.
Mr Wang said the company had to face many difficult challenges initially from the start until it went into production.
He said it is also a big challenge for Chinese employees working in PNG particularly with the language, cultural here, and the challenge of leaving behind their families to come to PNG just to operate the project.
However, that was a big commitment they have made for the development of the economy and its people.
Mr Wang said it was only last year that the company achieved full production capacity.
He also told the landowners at Mindre that all compensation claims which they were seeking must come within an agreement.
“With regards to business opportunities, we want to give business to landowners and we provide what we can, but there are other businesses that require strict management requirement” Mr Wang said.
He said the company is willing to discuss further with the landowners through Ramu NiCo community affairs department business development section to deliver their requirements in business opportunities.

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PNG earthquake’s political aftershocks require careful handling

People receive aid after the earthquake. Photo: Reuters

Paul Flanagan* | East Asia Forum | 6 April 2018

The 7.5-magnitude earthquake in Papua New Guinea (PNG) on 26 February 2018 killed over 100 people and left 270,000 in need of immediate humanitarian assistance. There have been dozens of physical aftershocks. But the most damaging aftershock may be the earthquake’s undermining of the ‘social licence’ of the affected areas’ PNG LNG project, which is responsible for 40 per cent of PNG’s exports.

The immediate disaster relief effort is proceeding slowly but surely. The Highlands Highway, a lifeline through PNG’s Highlands Region, has been cleared, although many important side roads remain blocked. In the affected areas, health centres were badly damaged but 73 per cent have re-opened. Early damage estimates are at US$200 million (600 million kina). International cash contributions totalled some US$45 million by mid-March, and there has been further in-kind assistance such as military transport support from Australia. A state of emergency in the area has been declared, and a new Restoration Authority has been created to guide reconstruction over the next four years.

The physical aftershocks have been significant: quakes measuring up to 6.7 in magnitude have killed more people and have kept them fearful of returning to sleep in their damaged homes or to tend their gardens. The latter is especially important — subsistence agriculture dominates the area, supplemented by coffee or other cash crops and by the promise of royalties from resource projects.

The public’s growing concern is whether the earthquake demonstrates the ancestral spirits’ disapproval of the LNG project. Most areas affected by the earthquake are very remote and have little contact with the modern world. Traditional belief systems remain very strong and ancestors are ever present.

Local landowners were meant to receive most of the 4 per cent of royalties and development levies based on the wellhead value of resource production in these areas. But a pre-condition for these payments was that the actual landowners be identified. This has not happened in the project area, and no payments have been made even though the project has been exporting gas since May 2014. Legal experts have serious doubts whether there can be any agreement on exactly who are the legitimate landowners.

Without such an agreement and with no payments to local landowners, there were already growing concerns about the project’s ‘social licence’ to operate. The Hide gas plant was closed by landowner leaders in late 2016 and special police squads were mobilised to protect the site.

The 2018 earthquake occurred among an already volatile mix of weapons, tribal conflicts, growing disenchantment with the project due to a lack of cash benefits, and traditional belief system concerns about the project. There is now local concern that the LNG project itself was the reason for the earthquake.

Although geological experts are clear that the earthquake resulted from natural movements, social media and local discussions are generally blaming ancestors or the drilling from the LNG project. The extent of this disquiet, although ‘irrational’, has resulted in senior political leaders such as PNG’s Minister for Finance and its Vice-Minister for Petroleum and Energy calling for an inquiry into the reasons for the earthquake to confirm if it was natural. PNG’s opposition leader has also called for all outstanding royalties to be paid before the project re-opens. Following a request from Prime Minister O’Neill, Geoscience Australia has agreed to investigate the causes.

The immediate economic impacts from the earthquake are the estimated US$200 million damages bill, the closure of the LNG project for an estimated eight weeks and the effect on government revenues.

These economic impacts are bearable. The government has promised to spend US$150 million in repairs, but this is likely to be spent over several years and is only a very small proportion of the state budget. Losing eight weeks of production at the LNG project is balanced out by the increase in oil prices in early 2018, so PNG’s overall export values in 2018 are still likely to exceed those in 2016 and 2017. Revenue flows from the project are only 1 per cent of the government’s budget due to very generous depreciation and other tax concessions.

The real economic risks are if the earthquake marks a turning point in local support for the LNG project. This could be psychological, building on the continuing frustrations over the non-payment of royalties and development levies, and the willingness of the local Huli people to take direct action.

The worst case scenario is one that PNG has already experienced. The loss of social licence for the Bougainville copper mine in 1989 started a decade-long civil war that led to thousands of deaths, undermined development prospects on the island for a decade, damaged PNG’s economy more broadly and quite directly led to the removal from office of prime ministers Paias Wingti and Julius Chan.

Following the earthquake, the PNG government and LNG-project partners will have to work even harder to maintain a social licence for the project. The alternative would be catastrophic for Papua New Guinea.

When the Bougainville Copper mine closed in 1989, there were other major resource projects in the pipeline to ‘pick up the slack’. This time around, even with LNG and other major mining projects in the offing, there are no projects as advanced or as large as the early 1990s resource projects of Kutubu Petroleum and the Porgera Gold Mine. History shows economic pressures lead to political pressures, and mishandling the ‘irrational’ elements of this earthquake would put Prime Minister Peter O’Neill’s coalition government under great strain.

* Paul Flanagan is Director of PNG Economics and an Associate at the Development Policy Centre, The Australian National University.

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HOW PNG LNG IS SHAKING UP THE EARTHQUAKE

The damming of the Tagari River by a landslide that occurred on 26 February 2018 (photograph by Barbara Lokes).

Michael Main* | EnviroSociety | March 28, 2018

The word for “earthquake” in the Huli language is wonderfully onomatopoeic: dindi dumbirumbi (literally “earth moving and shaking”). During fieldwork conducted in 2016, I interviewed an elderly Huli ritual leader named Dali Ango at his home in Koroba, located in Papua New Guinea’s (PNG) Hela Province. Huli ritual leaders, who inherited their position, were holders of a vast amount of traditional historical, genealogical, and cosmological knowledge. Ango talked of ancient land spirits (dama in Huli) named Hu and Hunabe, who, along with dindi dumbirumbi, formed the earth and the mountains. Earthquakes were just one of several indications that the earth was tending toward disaster. Earthquakes, droughts, floods, periods of famine, or even major warfare were held to be signs of impending doom that required the performance of large-scale dindi gamu (“earth spell”) rituals as a remedy (Ballard 1998: 73). In cultural terms, the most significant and influential seismic event that occurred in Huli history was the Plinian eruption of the Long Island volcano in the late seventeenth century (Blong 1982: 131). The resultant ash cloud that blanketed the landscape came to be known throughout Huli territory as mbingi, or “time of darkness.” The volcanic ash resulted in greatly increased fertility of the land and a period of abundant harvest for the years that followed. Mbingi was thought to be preceded by events such as earthquakes (which it quite likely was). Crucially, if people followed the correct procedures and behaviors during the event, then mbingi would result in a time of plenty. If social taboos were ignored and moral laws broken, then mbingi would be prolonged and all the crops would fail, and people would starve to death (Glasse 1995: 69).

Although these forms of knowledge have been largely forgotten, there is substantial evidence to suggest that seismic activity has been a major influence in Huli spiritual belief and practice. Before the recent and devastating magnitude 7.5 earthquake that struck Mount Sisa in Hela Province on 26 February this year, the last nearby earthquake in the order of magnitude 7 occurred near Tari, the largest Huli town, on 3 March 1954 (Ripperl and McCue 1983). The effects of this earthquake were recorded by missionaries and Australian government patrol officers who had established a permanent presence in Tari less than three years prior. A missionary with the Unevangelized Fields Mission wrote of the intensity of the earthquake and the disappearance of water from their well and the nearby spring (Twyman 1961). The aftershocks continued for months, and the impression this made on the Huli population was recorded in a patrol report conducted in October of the same year (Esdale 1954). The constant tremors were causing wide cracks in soft ground and Huli were noted to refer to dama spirits as being a cause.

A dominant motif of Huli spiritual belief and practice is the strange behavior of bodies of water. Lakes are said to disappear and move from one place to another. Lakes can rise up, and the movement of ripples is read in terms of good and bad omen. Hidden spirit lakes, with the names bume and deme (pertaining to the heart and the eye), are said to inhabit mountainous areas. After the Tumbi limestone quarry collapsed in 2014, killing more than a dozen people, the collapse was explained to me in terms of the blockage of bume and deme that was caused by ExxonMobil’s contractor, who constructed a road that blocked a stream emerging from the base of the quarry. The limestone karst system that dominates the Huli landscape has been instrumental in shaping these Huli beliefs and much of Huli mythology. Beneath this landscape can be found a complex network of underground rivers, sinkholes, and caves. Earthquakes can easily disrupt this system, causing instant changes to lake levels, and stream behavior. Major earthquakes do not usually occur as single events but are accompanied by a long period of aftershocks, as had been the case since 26 February this year, and recorded after March 1954. In 2016, I visited Tuandaga, a major Huli site of ritual significance, and one of the few still in use. At Tuandaga, as had been the case at ritual sites all across Huli territory, oblations are made of cooked pork for the appeasement of the dama spirit in the lake. The lake is said to rise up to meet the offering. Other rites involve throwing the offering into the water while the behavior of the ripples are observed. A certain type of rippling foretells of bad times for the fate of the land. Very large earthquakes that occur in this steep and brittle landscape can result in major landslides and the blockage of rivers, as is presently the case. At the time of writing, the Tagari River, which is the main river the runs through Huli territory, is dammed by a major landslide that is threatening a mudslide and flooding downstream once the unconsolidated dam is overflowed.

PNG LNG Huli landowners at Komo with Mount Sisa in the background (photograph by the author).

At Komo in 2016, just a few kilometers from the epicenter of the recent earthquake, I was told a Huli mythological tale about a man with no anus. A great feast was held, and the man with no anus just kept eating. His friend noticed that the man was unable to relieve himself and his belly was becoming bigger and bigger. So his friend built a house and inside he dug a hole in which he stuck a sharpened stick vertically into the ground. He covered up the hole with banana leaves and invited his friend inside to sit. When his friend sat on the sharpened stick, it pierced for him an anus, and when he pulled it out all his waste rushed out of him covering the whole place. This story, and versions of it, bears resemblance to the effect of a landslide that blocks a river, which is a not uncommon occurrence in the history of the Papua New Guinean highlands.

In the aftermath of the 26 February earthquake, the question that is dominating the minds of Huli residents is the role that the giant PNG LNG (Liquefied Natural Gas) project played in the earthquake’s cause. The PNG LNG project, constructed and operated by ExxonMobil, is the largest resource extraction project in PNG’s history and has been a source of intense anger for the vast majority of Huli landowners, who have yet to see any benefits from the extraction and sale of gas from their land. There is widespread belief that the earthquake was caused by gas extraction activities, which is an opinion that comes on top of an already existing resentment over the development failures of the project. This perception also extends to many of PNG’s politicians who requested that the Australian government provide an independent assessment of the earthquake’s cause. The perception of the earthquake’s cause is driven by a combination of scientific evidence and cosmological belief. The earthquake occurred along the Papuan Fold Belt in a region where earthquakes of magnitude 7 are predicted to occur approximately every 60 years (Ripperl and McCue 1983). The independent assessment provided by Geoscience Australia concluded that the earthquake was naturally occurring, yet this finding was disputed by the governor of Hela Province, who called for an independent review to be conducted according to the terms of the Hela Provincial government (The National 2018). Skepticism over the cause of the earthquake is supported by issues with gas extraction projects in various parts of the world, particularly in relation to newer technologies and the increase in the use of fracking (Kuchment 2016). Recognizing this, the managing director of Oil Search, Peter Botton, responded that this perception should be treated as “a communications issue” (Barrett and Gloystein 2018).

Resentment toward the PNG LNG project, which has intersected with the horror and trauma experienced by the recent earthquake, is not a communications issue. It is a development issue. Huli cosmological belief that the extraction of their gas will bring about the end of the world has been fueled over the past four years by growing resentment over the failure of the project to come good on its development promises. Last month’s devastating earthquake only provides confirmation of a widely held prophetic belief in the disaster that will befall the Huli population should they give away their gas. Gas for the PNG LNG project is extracted from a mountain ridge named Hides Ridge after the early Australian explorer Jack Hides. The Huli name for this mountain is Gigira. Moist air that rises over Gigira tends to form clouds that give the appearance of smoke oozing from the ridge, similar to the smoke from a traditional kunai grass-roofed house with a fire inside. This visual effect provides the basis for the belief that there is a fire burning underneath Mount Gigira. A giant log of hardwood commonly used in fireplaces, a type of tree known in Huli as lai, is said to run the length of the Gigira range. One day, the ancestors said, a man with red legs will come to take the fire. You may give him some of the fire, but do not give away all the fire lest the world will end. When ExxonMobil began to drill for gas on Mount Gigira, local residents packed up and left in the fear that the fire would spill out from the mountain and engulf them. In the absence of development benefits from the PNG LNG project, one thing is clear: the landowners have given away all their fire.

Cloud formation over the Gigira range (photograph by the author).

Earthquakes, which were once understood in the context of a complex set of intersecting beliefs, are now attributed to a single cause that has come to dominate the Huli landscape both physically and cosmologically. The old knowledge and practices have long been abandoned, and a space for new interpretations based on contemporary realities has opened up. The PNG LNG project, with its promise of abundant wealth yet delivery of disaster and neglect, has become the new mbingi. Before the earthquake, there were mounting threats being made against the project, including an armed blockade in August 2016. These threats are a direct result of the development failures of the project, such that it has become in the best interests of the landowners to shut the project down in the hope that a change in development outcomes can be forced. With the PNG LNG project currently in forced shut down because of the damage caused by the earthquake, it is in the landowners’ best interest to blame the earthquake on the project. A PNG LNG project that had kept its promises would have been viewed favorably by a population that might be turning its attention to the challenges of developing the highlands in the context of life in an earthquake zone.

In 1954, the missionaries at Tari watched their newly built houses collapse around them while the local bush material houses would “sway with the earthwaves like a tree in the wind” (Tomassetti 1997: 65). The highlands missionaries were later required to build their houses according to New Zealand Earthquake Standards (Wood and Reeson 1987: 75). The extent of suffering in this most recent major earthquake is partly because of the amount of built infrastructure that has collapsed, none of which existed in 1954. If the PNG LNG project had delivered on its promises of education and training opportunities, infrastructure, business development, and alleviation of poverty, then the concern of its Huli landowners might be over how to utilize their resource to better develop their province to cope with earthquakes into the future. As it is, the PNG LNG project is logically understood in the context of their resource curse. If the proponents of the PNG LNG project had a better understanding of these dynamics, then they might be prompted to do something about it. Communications issue indeed.

*Michael Main is a PhD candidate in the School of Culture, History and Language at the Australian National University. Michael’s research is focused on Huli society and culture in Papua New Guinea’s Hela Province, as well as the rapid changes that have been unfolding since the colonial period of the 1950s, culminating in the construction of ExxonMobil’s giant PNG LNG project.


References

Ballard, Chris. 1998. “The Sun by Night: Huli Moral Topography and Myths in a Time of Darkness.” In Fluid Ontologies: Myth, Ritual and Philosophy in the Highlands of Papua New Guinea, ed. Laurence R. Goldman and Chris Ballard, 67–86. Westport, CT: Bergin & Garvey.

Barrett, Jonathan, and Henning Gloystein. 2018. “Shakes and Superstition: Exxon Faces Backlash in Papua New Guinea.” Reuters, 7 March https://www.reuters.com/article/us-papua-quake-exxon-insight/shakes-and-superstition-exxon-faces-backlash-in-papua-new-guinea-idUSKCN1GJ12S.

Blong, Russell J. 1982. The Time of Darkness: Local Legends and Volcanic Reality in Papua New Guinea. Canberra: Australian National University Press.

Esdale, F. V. 1954. Tari Patrol Report No. 2 of 1954/55. Retrieved from Patrol Reports [microform]. Port Moresby: National Archives of Papua New Guinea:

Glasse, R. 1995. “Time Belong Mbingi: Religious Syncretismand the Pacification of the Huli.” In Papuan Borderlands, Huli, Duna, and Ipili Perspectives on the Papua New Guinea Highlands, ed. Aletta Biersack, 57–86. Ann Arbor: University of Michigan Press.

Kuchment, Anna. 2016. “Drilling for Earthquakes.” Scientific American, 28 March. https://www.scientificamerican.com/article/drilling-for-earthquakes.

Ripperl, I. D., and K. F. McCue. 1983. “The Seismic Zone of the Papuan Fold Belt.” BMR Journal of Australian Geology and Geophysics 8: 147–156.

The National. 2018. “Report: Earthquake Natural.” 20 March.

Tomassetti, Berard. 1997. Papua New Guinea Encore. Victoria, KS: St. Fidelis Friary.

Twyman, Eva. 1961. The Battle for the Bigwigs. Melbourne: Unevangelized Fields Mission.

Wood, A. Harold, and MargaretnReeson. 1987. A Bridge Is Built: A Story of the United Church in the Highlands of Papua New Guinea. Sydney: Commission for Mission Uniting Church in Australia.

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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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