Tag Archives: Wafi-Golpu

Bank of Papua New Guinea urges tougher stance on new resources projects

PNG’s economy has surged but tax revenue has not. Source: Department of Treasury and BAPNG

Implicit in the Central Bank’s criticism is that those who negotiated and signed off on the Exxon-Mobil LNG and Ramu nickel mine agreements etc, were NOT acting in PNG’s national interest.

So who are these people and where is the accountability? 

David James | Business Advantage | 10 April 2019

The March Monetary Policy Statement from the Bank of Papua New Guinea has urged the government to rethink the way it negotiates tax concessions and exemptions with new resources projects. Adopting a strong stance, it points to how previous agreements have been a factor in foreign exchange shortages and adverse trends in government finances.

The statement says that the ‘current policies in relation to the extractive industries give a lot of tax concessions to the project partners for the development of major projects in PNG.’

These tax concessions, it says, has resulted in less availability of foreign exchange and has not strengthened tax revenues.

PNG in 2018 had a large current account surplus, indicating greater trade and finance outflows than inflows. This would normally result in strong demand for the kina, but it ‘did not translate into sufficient increase in inflows to the foreign exchange market’.

A trade performance that normally would have meant foreign exchange was easy to obtain, did not have that effect because of exemptions and concessions to resources projects.

‘If a significant portion, or all, of the export receipts were brought into the country, it would more than adequately cater for all the demand for foreign currency in the foreign exchange market,’ the Monetary Policy Statement (MPS) said.

‘This is not happening because most of the export earnings in foreign currency are held in offshore foreign currency accounts.’

Mineral GDP has risen, but tax from mining has fallen. Source: Department of Treasury and BAPNG

Backlog

The statement does note, however, that the situation in the foreign exchange markets is improving.

‘The outstanding backlog declined significantly from K1.739.3 billion in December 2017 to K445.4 million at the end of 2018, and to K320.1 million in February 2019.

‘The average time taken for the orders to be served has declined from 5 months to less than 3 months over the same period.’

But it says that the State Negotiation Team (SNT) should ‘push for the country’s national interest’ when negotiating with developers, pointing especially to the Papua LNG and Wafi-Golpu projects.

The Bank of PNG proposes:

  1. The introduction of a Capital Gains Tax on real property including mining and petroleum licenses
  2. Reform of the current Extractive industries fiscal regime
  3. Review of tax incentives
  4. Meeting of Domestic Market Obligations (DMOs) to secure gas for domestic uses
  5. Third Party Access to allow development of other resources

The MPS points to ‘serious concerns’ about the ‘broad exemptions and concessions’ given to the PNG LNG Project.

The report said it ‘rendered the Central Bank ineffective in the enforcement of certain provisions of the Exchange Control Regulation, and consequently the PNG economy has missed out on foreign exchange inflows, tax receipts, and other matters of national interest.

PNG is in the black on trade flows (current account) but in the red on financial flows (Capital and Financial account). Source: BAPNG

Budget deficit

In 2018, there was a budget deficit of K2.048 billion or 2.5 per cent of nominal GDP, according to the reportwhich expressed concerns about the level of public debt.

‘Over the last seven years, the budget deficits under the Government’s expansionary fiscal policy have been financed by increased borrowing, as revenue did not grow sufficiently to meet increased expenditures.

‘As a result, total public debt continued to increase in 2018 to K25.606 billion, or 31.1 per cent of GDP, and is planned to increase further in 2019.

‘The continued high budget deficits and debt level are a cause of concern for fiscal sustainability and its impact on macroeconomic stability.’

Annual headline inflation has declined from an average of 5.4 per cent in 2017 to an average of 4.5 per cent in 2018.

It is forecast to be 3.5-4 per cent for 2019.

The Bank said it expects to keep interest rates steady for the next six months.

The kina depreciated against the US dollar from US$0.3095 at the end of December 2017 to US$0.2965 in the March quarter, reflecting high import orders.

Against the Australian dollar, the kina appreciated from A$0.3967 at the end of December 2017 to A$0.4195 in the first quarter of 2019.

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Will reviews really end tax concessions for extractive industries?

Everyone is talking tough but can they really deliver?

Bank of PNG supports government review of tax concessions

The National aka The Loggers Times | April 4, 2019

TAX concessions granted to developers of major projects in the country have resulted in lower forex and tax revenue to the Government, Bank of Papua New Guinea (BPNG) says.
In its Monetary Policy Statement released this week, Governor Loi Bakani said the current policies in relation to the extractive industries gave a lot of tax concessions to project partners for the development of major projects.
Bakani said BPNG supported the Government’s medium term revenue strategy from 2018-22 to review tax concessions.
“It is the Bank’s (BPNG) view that the Papua LNG and Wafi Golpu projects be included in this review so that much needed revenue for the Government can be raised,” he said.
The statement further noted that the increase in export earnings and the continued current account surplus has not translated into a significant increase in foreign exchange inflows into the foreign exchange market.
In total, PNG’s export earnings should more than adequately cover all the demand for foreign currency.
This however according to BPNG was not happening as various Project Development Agreements allow developers of the various extractive industry projects to have foreign accounts offshore.
Most of the export earnings in foreign currency were held in offshore accounts and do not enter the foreign exchange market, the bank said.

National interest worries Bakani

The National aka The Loggers Times | April 3, 2019

STATE negotiating teams (SNTs) involved in major projects have not fully pursued the national interest for all project development agreements (PDA) over the years, says the Bank of PNG.
According to BPNG Monetary Policy Statement approved by Governor Loi Bakani, the SNTs with the support of technical expertise should effectively negotiate for national interest with the developers after wide public consultation and input.
“The existing legislations and policies regarding development of the extractive industry do not clearly provide for national interest that is anchored in the national goals and directive principles under Section 25 of the national Constitution, to guide the Government in negotiating better terms of the project development agreements ,” he said.
“With the proposed development of the Papua LNG and others in the future, the Government is obliged to negotiate mutually-beneficial tax concessions and other benefits.”
The bank encouraged the Government to improve its capacity and governance framework, and financial policies as per the medium-term revenue strategy (2018 – 2022).
This includes:

  • Introducing capital gains tax on real property, including mining and petroleum licences;
  • reforming the current extractive industries’ fiscal regime;
  • reviewing tax initiatives;
  • domestic market obligation to secure gas for domestic use; and
  • Third-party access to allow development of other resources

Bakani said BPNG had serious concerns about the broad exemptions and concessions given to the PNG LNG project, pertaining to taxes, exchange control and foreign currency provisions as well as the confidentiality clause.
“These provisions under the PNG LNG gas agreement rendered the Bank of PNG ineffective in the enforcement of certain provisions of the exchange control regulation,” he said.
“Consequently, the Papua New Guinea economy has missed out on foreign exchange inflows, tax inflows, tax receipts and other matters of national interest.
“The Government must not repeat this for the Papua LNG project and other future projects.”

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Wafi-Golpu land dispute: The other side of the story

Lorenitz Gaius | The National aka The Loggers Times | March 18, 2019

IT appears that some people, like one PK Anding, had lately, been vocal and supportive of the Piu Incorporated Land Group’s claim of ownership of the Wafi-Golpu project land. PK Anding had even gone as far as to mention that the Lutheran Church had written to the prime minister informing him of its support of Piu’s claim of ownership.

Further to my previous letter to the editor, I briefly mentioned that the claim by the Piu Incorporated Land Group, led by chairman Martin Tapei, was thrown out by the Supreme Court. A brief synopsis of the case is provided below for anyone out there to appreciate the origin of the Piu Incorporated Land Group claims of ownership over the 50,000 hectares of customary land.

On Feb 22, 2001, Piu ILG applied to the Department of Lands and Physical Planning for a special agricultural business lease (SABL) over the Wafi-Golpu project land comprising of 6240 hectares. This was done without the knowledge of the people of Yanta, Hengaybu and Babuaf people, including the other seven villages in the area.

On July 24, 2001, an SABL lease was granted to the Piu ILG by the minister for lands under the Land Act comprising of 50,000 hectares instead of the 6240 hectares applied for. This grant was vehemently disputed by the Yanta, Hengabu, Babuaf people as well as the other known seven villages within the area.

On May 18, 2003, following pressures and protests by these groups within the 50,000 hectares of land, the new minister for lands and physical planning intervened and revoked Piu’s SABL lease. His decision was based on the non-compliance of the requirements and provisions of the Land Act under Section 10 and 102.

On Nov 19, 2004, the Piu ILG, not satisfied with the minister’s revocation of its SABL lease, applied to the National Court for judicial review for which leave was granted on May 5, 2005. The minister’s revocation was cancelled and Piu’s ILG title was restored, albeit temporarily.

On Aug 29, 2005, Yanta, Hengabu, Babuaf and Towangola appealed to the Supreme Court for a judicial review of the National Court order of Aug 18, 2004. The appeal was upheld and the National Court judgment was declared void, and the SABL lease granted to Piu on July 24, 2001, was declared null and void.

So to whoever is still supporting the Piu ILG claims of ownership over the Wafi-Golpu project land, I hope the above information gives you a clear picture of the situation. Questions should be asked about how Piu’s claim of 6240 hectares ended up with 50,000 hectares of customary land, especially when the land is communally owned?

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Govt not learning from experience

Freddy Gigmai | Post Courier | February 8, 2019

The current government along with its responsible agencies are still not learning from the damaging experiences of mining activities in the country.

The experiences of Panguna, Ok Tedi, Tolukuma, and others are all there for the responsible authorities to learn and do things properly. The environmental pollution and damages caused by these mines have exceeded the monetary and other benefits put together.

The evidence are overwhelming but the government is still somewhat ignorant thus placing short term revenue gains ahead of long term gains and sustainability and dependence of our small people on the natural resources such as river systems, forests, seas, etc.

The recent MoU signed by the O’Neill government with the developers of the multi-billion kina Wafi-Golpu mining project in Morobe province is another clear indication that it does not care about the local peoples welfare and long term survival.

The Morobe Governor and Huon Gulf MP Ross Seymour with the concerned landowners must be commended for voicing their concerns against the signed MoU.

The MoU is rushed and is sinister because there is no clear indication of the where the mine tailings will be properly stored and disposed. At present, it is apparent that the tailings will no doubt be dumped into the sea on the Morobe coast. The environmental damages that the tailings disposal pose are unimaginable.

Although Bulolo MP and Energy Minister Sam Basil and former Morobe Governor Kelly Naru have said that the MoU is only a guide to pave the way forward, the concerns of the Morobe people and leaders who will be directly affected must be respected and considered.

It is very surprising to see the minister responsible for mining and Kainantu MP Johnson Tuke silent on this very important issue.

Also on a close look of the electoral boundaries, eighty percent of the Wafi-Golpu project is in the Huon Gulf electorate and not in Bulolo-Wau so

Basil’s heavy involvement and not Ross Seymour as the Huon Gulf MP with Governor Saonu is a concern as well.

The natural resources and assets of this country must not be taken for a ride by a few privileged individuals. The MPs are voted into parliament to make decisions in the best interest of the people as their first priority and not for themselves and the developers who after all are short terms profit-oriented visitors who only care to bring the best returns to their shareholders only.

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MP warns govt not to take people for granted

MP calls for Wafi-Golpu ‘value proposition’

Cedric Patjole | PNG Loop | February 7, 2019

The Huon MP has called on the Government to tell the people of Morobe and PNG the true value proposition of the recently signed Memorandum of Understanding with the Wafi-Golpu Joint Venture.

Ross Seymour says the Province and its people have always supported the growth and development agenda of the country and economy, but they should not be taken for granted.

In a statement, the Huon MP said they need to know that the State is putting their interests first.

Seymour said: “History shows that Morobe Province and the people of Morobe have always been at the forefront of progressing development of Papua New Guinea well before the birth of our new united country in 1975 to the present day.

“Morobe’s economic contributions began shortly after it was settled in the late 1800s, first by the Germans then later as a British colony under the Australian Administration. Morobe people through their toils had set the foundations for the journey towards nationhood. Yet in those early years, despite their efforts, they remained uninformed onlookers.

“In the 1920s and ‘30s, the Wau and Bulolo minefields had also made many in both Australia and the new protectorate of Papua and New Guinea prosperous and wealthy, but not the people of Morobe. Perhaps it is time to recognise our sacrifice and our efforts, and give back to the people of Morobe what is fair and equitable, and not least to the people of Huon, Bulolo and Lae.

Seymour added: “Todaywe shall be impacted again by another mega-mining project, but today we do not suffer from ignorance or a lack of knowledge and awareness of the economic, social and commercial value of the Wafi-Golpu mining project and not least its environmental impacts.”

He said as of today, they refuse to be bystanders and uninformed onlookers.

Seymour claims the State and the corporate bodies have already agreed to a 51 percent / 49 percent free cashflow split, and they expect that the benefits accrued from the mining project is extensively redistributed to the rest of PNG.

“So from within Papua New Guinea’s share as guaranteed by this current legislation what is my people’s fair and equitable value proposition?

“As I understand it, the Mining Act precipitates a negotiation process and an outcome thereafter and this can only happen and be determined in a negotiated process during a development forum and secured under an MOA which has not yet been concluded!

“As stakeholders in the development forum process I ask the National Government to be absolutely transparent in its dealings with my people as never again shall we end up with empty pockets, deprived of economic and commercial empowerment!”

Seymour impresses upon the Prime Minister and Ministers Johnson Tuke and Sam Basil to inform the public of the true value proposition of the MOU as opposed to what would have been if they had merely employed the existing and current provisions of the Mining Act.

“As its value proposition is guaranteed by law – after all I believe this is really what my Honorable Governor for Morobe is seeking to clarify on behalf of the Tutumang.”

Seymour also called on Governor Ginson Saonu to employ wisdom in dialogue rather than submit to a Court proceeding to settle this delicate issue.

Meanwhile, the Prime Minister has stated in the January sitting of Parliament that the MOU signed with the WGJV is an understanding between the parties on their expectations of the project.

He said they will ensure the Tutumang, landowners and other stakeholders have properly negotiated stakes before the project agreement is concluded by June 30th this year.

“So we have got another five months to continue to discuss some of the issue that we want to, particularly on the benefits too. Provincial governments, the State, the landowners and other stakeholders, let me remind our good leaders that we are also on the same side that we want to bring maximum benefit to our people and to our country.”

O’Neill said despite the current court action by the Tutumang against the State, they will not be excluded and will be involved in the project agreement negotiations which are yet to take place.

“We have tried to engage with the provincial government but there has been some misunderstanding. Morobe Provincial Government to its own wish they have established a consultancy team to advise them on the issues going forward and we respect that, that is the right of the Morobe Provincial Government but we are not excluding the Provincial Government on all these negotiations,” said the Prime Minister.

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Post Courier calls for new approach to landowner consultation

Wafi-Golpu And Frieda River Proposed Mines Are Nothing New To PNG

Post Courier Editorial | February 4, 2019

Papua New Guinea of all places in the world should know better than most other advancing, under developed and developing worlds what the price of new world class mines operations entail.

The industry itself is so sophisticated and complex that for an infant resource based country like PNG, the understanding and economics of the business has yet to be fully understood and appreciated. That is not to say PNG has not had its say and experienced what it means because the country’s history itself has demonstrated to the world what can and cannot go wrong in such developments.

It is a painful memory to give Bougainville as an example because that was the first ever manifestation of a culmination of events that took place because of the absence of modern day dialogue between developers and the local people of PNG.

Bougainville is too painful an experience to always delve on due to the that it was the first time ever that a civil war was fought on PNG soil. PNG’s experience are the two World Wars where it was not spared the agony of witnessing human beings being slaughtered and killed at random at the behest of two or more foreign powers attempting to take control of the world.

PNG was just caught up in the international quagmire of geo-political and militarily ambitious strategic to be the best in the world.

The point here then is that PNG is not short of world or international experience and exposure that it has learnt or not from. In this case Wafi and Golpu plus Freida River proposed gold and copper mines are the perfect opportunity to showcase what PNG can do when it comes to benefit streams which is what all landowners are screaming murder about at the moment. So with the unique experience that many of PNG’s outstation and communication officers process, perhaps the two new mining projects should set the new standards and technical understanding of what new resources development projects should be realigned in relation to connections with local people.

This is as opposed to the standard policies and principles contained within all mining and other resource projects agreements and understandings.

This means where there is no clear clarification of how best landowners should be involved in progressive developments be they technical or project economics, they should be debriefed like all other stakeholders.

It is about time where local landowners considered illiterate and uneducated are left out from the technical briefings provided and with the wishful thinking that community liaison officers can best do the job on behalf of developers and investors to explain basic project economics to curtail resentment. Landowners should be engaged from day one until project agreements are signed so as to avoid the prevailing misconceptions about who benefits most from the millions invested in projects.

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Foreign miners to hold state’s equity: O’Neill

Cedric Patjole | Loop PNG | January 30, 2019

Prime Minister Peter O’Neill says understandings have been reached with Papua LNG developer Total E&P PNG and the Wafi-Golpu Joint Venture (WGJV) to hold State’s equity until the first export from both projects.

This is to ensure the state does not borrow to purchase equity in a project.

“The initial understanding we have with the second LNG and in particular Wafi-Golpu is that our participation in equity will be carried by the developer until the first export of either the gold and copper from Wafi-Golpu or in the second LNG Project, meaning we don’t have to borrow large sums of money that we are unable to repay.

“This is our resource, the developer has to carry us to a certain extent. I’m thankful that Total and Newcrest have agreed to those understanding and we are looking forward to our Ministerial committee finalising the development agreement that will make sure the resource owners are fully participating rather than waiting for loans to be paid and of course, the benefits rolling out to them,” said O’Neill.

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