Tag Archives: transparency

Proposed policy to declare mining revenue

Cedric Patjole | PNG Loop | October 9, 2017

The Department of Mineral Policy and Geohazards Management (DMPGH) says it is working to introduce a policy for stakeholders in the mining industry to declare any revenue received or made from mining projects.

Secretary Harry Kore told Loop PNG that the policy idea came about during consultations for the Revised Mining Act.

He said while there are reports of mining revenue generated, a lot of locals impacted by mining activities claim to not see any tangible results.

Kore said the policy will ensure stakeholders such as provincial governments, authorities such as the Mineral Resources Authority (MRA), Mineral Resources Development Cooperation (MRDC), as well as landowner association chairmen and landowner company CEOs declare revenue received for the bene t of all.

“You fail to do that and you will be held accountable and you will be penalised under the law. So it becomes a practise. Every quarter they just declare their interest. We know that so much money goes to our landowners but whether it trickles down to the peoples is another thing,” said Kore.

The policy idea is similar to a draft legislation currently being drawn up by the PNG Extractive Industry Transparency Initiative to make mandatory all revenue from the mineral, petroleum and gas sectors to be fully disclosed as per good governance standards.

Kore said they are yet to have formal discussions regarding the policy idea however, there is cooperation and the policy complements that of the work the EITI is undertaking.

Secretary Kore added that one of the agendas of the policy is to ensure there is sustainability in how revenue is invested back in the country.

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PNGEITI: Reveal contracts, licences for transparency

Cedric Patjole | PNG Loop | August 29, 2017

The PNG Extractive Industries Transparency Initiative (EITI) says access to resource extraction contracts and licences would be valuable to the country for transparency in the industry.

According to the PNGEITI 2014 Report, resource extraction contracts and licences remain confidential information despite interest groups seeking to change for greater transparency.

The report states that details of contracts and licences are protected by confidentiality provisions in Section 163 of the Mining Act, Section 51 of the Mineral Resource Authority (MRA) Act and Section 159 of the Oil and Gas Act, which are held and maintained by the Solicitor General’s Office.

And without legislative amendments, agreements can only be made public with the approval of both the company and the Department of Petroleum and Energy (DPE) or the MRA as appropriate.

The report states that no contract had been made publicly available to date. This is an issue which civil society organisations in particular seek to change in the interest of greater transparency.

“Specific clauses clarifying public access to the content of agreements signed by or with the State on resource projects would be valuable. Part 1 of the Mining Act however, provides for Constitutional limitations as the mining legislation is for the purpose of giving effect to the national interest,” states the report.

PNG EITI Head of National Secretariat, Lucas Alkan, said the Multi Stakeholder Group (MSG) discussed issues relating to disclosure of resource agreements in recent meetings.

“We feel that mining companies may feel comfortable disclosing agreements, but that oil and gas companies, being more exposed to global market dynamics, may feel that agreement details would reveal their strategy, and would thus be more commercially sensitive,”Alkan said.

“But we are having constructive dialogues with companies on the information that could be disclosed and what may not be disclosed to the public due to commercial bearings to the detriment of a particular company.

“We hope to imbed such information in future EITI reporting as it is required under the EITI standard,” Alkan added.

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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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