Economy. Papua New Guinea press review

The Government of Papua New Guinea (PNG) revised the 2020 budget figures to accommodate the adverse impact of the COVID-19 on the country’s economy. On the 10th of September Treasurer Ian Ling-Stuckey tabled the Mid-Year Economic and Fiscal report and a Supplementary Budget in Parliament, announcing an extra expenditure of K645 million (US$182,68 million), and a fall in revenue by PGK2.7 billion (US$760 million) (a further deficit of PGK1.99 million – US$560 million) due to the COVID-19 impact, the global slump in oil and gas prices and issues in the mining industry. Parliament last November had passed a PGK4.6 million (US$1,3 billion) deficit budget, with PGK18.7 billion (US$5,3 billion) in expenditure against K14.4 billion (US$4,08 billion) in revenue. It was forecasting a 2% growth which has now been revised down to -3%. Mr. Ian Ling-Stuckey also projected that the debt-to-Gross Domestic Product ratio which was at 40.3% this year could rise to 55% in 2021 and 2022. The Government expects to boost growth through major investments in the manufacturing sector such as the approved US$350 million (PGK1.2 billion) cement-lime manufacturing plant in Central Province. Treasurer also expressed optimism in the exporting of «hydro-power potential and developing green industrial operations for domestic consumption and export to overseas markets». The Government is also banking on agriculture and the small-medium businesses which are central in its COVID-19 economic support programme. [1]

Mr. Ling-Stuckey also said that he would also table the amendment bill to the Superannuation Act to enable workers who have lost their jobs or were on reduced pay to access their retirement savings kept in their superannuation funds. PNG Cabinet recently agreed that the amendment be made not only during the COVID-19 period but also during natural disasters. The amendment will be on Section 90 of the legislation which restricts early withdrawals of retirement savings. [2]

The Supplementary Budget, which was tabled in Parliament will address the slump in government revenue as a result of economic contractions caused by the coronavirus pandemic. Prime Minister of Papua New Guinea Hon. James Marape said that there would be re-allocations of funding to enable interventions, especially in key sectors to ensure economic sustainability and to provide essential services. Mr. Marape marked that 2020 had been «the toughest” in 45 years of independence: The COVID-19-induced global economic contraction means that we have less than forecast economic activities […] We had no option but to clean up the mess of the [Peter] O’Neill era while settling many of contractual and unfulfilled liabilities all over the country, » Mr. Marape said and added that the Works Department had unpaid contracts costing around PGK4 billion (US$1,13 billion) for example: «Last year we had to pay PGK300 million (US$84 million) to settle off those unpaid contracts». [3]

At the same time, Shadow Treasurer Joseph Lelang says the Supplementary Budget failed to capture important issues to address the impact of the COVID-19. According to Mr. Lelang, the Opposition had expected the budget to not only address challenges the country was facing but also how to set the country on a path of recovery. «We acknowledge that the world economy is going through a difficult phase which has affected all countries including PNG […] The COVID-19 pandemic caused reduction in world trade and significant movements in exchange rates between nations […] PNG entered the COVID-19 pandemic on a vulnerable position with high debt, declining revenue and adverse terms of trade, rising unemployment and shortages in the country’s foreign reserves […] The Opposition feels that not much attention has been given to address the revenue side of the budget since this government took office […] This is why this government is taking the easy way out and entertaining more and more borrowing. It is the responsibility of the treasurer to provide leadership in this, » Shadow Treasurer said. Mr. Lelang also noted that the Government for the fall in revenue collections which should not be blamed solely on COVID-19: «A large chunk of the revenue for the state is dependent on export of and operation of major resource projects such as the Porgera mine plus delays in PNG’s resource projects in the pipeline are detrimental to the government’s cash flow». [4]

The Government’s intention to amend the Central Banking Act 2000 (CBA 2000) has unsettled Bank of PNG Governor Loi Bakani who said the purported changes would return PNG to «the lost decade of the 1990s where the bank basically printed money to fund the budget». In a letter dated August 27, which was obtained by the Post-Courier, Governor Bakani wrote to the Minister for Treasury Ian Ling-Stuckey raising serious concerns about plans to amend the CBA. According to Mr. Bakani, a particular concern was the talk on amending section 55 of CBA 2000, which prohibits the Central Bank from directly financing the Government. Section 55 of the CBA deals specifically with the economic relationship between the BPNG and the government and has strict sets of guidelines that dictate finances to the government. Subsection 9, which Mr Bakani was referring to, states clearly «the Central Bank shall not grant advances to the government». [5]

However, former PNG Prime Minister Peter O’Neil says that the intended supplementary budget and amendments to the Fiscal Responsibility and Central Banking Acts are bound to cause long-lasting damage to the economy and the well-being of people. «Now it has been revealed that the Government intends to once again increase the legal debt to GDP ratio to reach 60%, and undermine the independence of the Central Bank and increase debt by simply printing additional money that will drive up inflation on consumer goods, » stated Mr. O’Neil. In MP’s opinion, «the desperation of Prime Minister James Marape had hit a new low as he tried to destroy the independence of the Bank of Papua New Guinea so he could access quick money to fill almost a PGK3 billion revenue hole that was mostly of the Government’s creation». [6]

PNG Prime Minister Hon. James Marape said that said that negotiations on multi-million kina oil, gas and gold projects are expected to be completed this year. The projects include Porgera in Enga Province, Wafi-Golpu in Morobe Province, Papua LNG and Pasca Gas projects in Gulf, and P’nyang gas in Western Province. «I remain confident with the work done so far by the respective ministers and the state negotiation team […] I can assure everyone and the people that we will remain focused on achieving a fair and equitable share of the benefits, » Mr. Marape marked. [7]

PNG Prime Minister also expressed the concern for some national leaders’ doubts about the country’s ability to manage its mines. According to Mr. Marape, it was sad and shameful to doubt the capacity of PNG’s engineers, accountants and mining specialists. Prime Minister said that the COVID-19 situation had seen Papua New Guinea nationals taking the lead in running the mines, with 99% of Porgera managed by locals until the lease expired. Mr. Marape also stated that the Government was trying to ensure that Kumul Mineral Holdings Ltd and its subsidiaries were in a position financially to run the Porgera mine when it begins operation. The Government can look at getting loans from banks such as the Bank South Pacific (BSP) to financially empower the company to operate. [8]

Mr. Marape also noted that now that Kumul Minerals Holdings Limited has the Special Mining Lease of Porgera gold mine, the State, through Mineral Resources Authority, Department of Mining and KMHL, will proceed to have discussions with both the Enga Provincial Government and the landowners. [9]

In turn, members of the Opposition met with the Pogera landowners association (PLOA) at Parliament to receive a petition outlining certain grievances they have surrounding the current agreements between the Government and the landowners. The PLOA representatives had the audience with the Opposition Leader Belden Namah, People’s National Congress (PNC) Party leader Peter O’Neill, Shadow Minister for Mining Sam Akotai as well as other Opposition MPs. Former PLOA chairman Tony Ekepa presented the copies of the petitions to Mr Namah, Mr O’Neill and Mr Akotai which Mr Namah says will be given to their lawyers to examine if the petition raises legal issues to be tried in court. However, Ray Pundi from the PLOA renegotiation committee said that the Government has not had consultative meetings with the people on the ground about Kumul Mineral Holdings Limited (KMHL) taking over the mine. [10]

Enga Province Governor Sir Peter Ipatas has slammed the opposition for using the Porgera mine saga to play cheap politics. Mr. Ipatas said the provincial government had sacrificed close to K20 million (US$5,66 million) in royalty monies to see that the people benefitted well. « The Marape government responded to our call and has made a decision in the national interest to return the resource to Papua New Guineans after consulting with all stakeholders […] That is a bold and admirable decision that needs to be supported by both sides of Parliament. These opposition MPs were nowhere to be seen when the Enga provincial government and landowners were fighting for their right to be consulted on the future of Porgera, », Sir Peter said. Mr. Ipatas also noted that stressed that as national leaders, they should be serving the interests of PNG and not exploiting landowners as pawns in their own political agenda. He called on all leaders of the landowner groups to unite on behalf of the local community and to get involved in the consultation process in order to secure a better benefit package for their people. [11]

PNG Trade and Industry Minister, William Duma also has come out in supporting the stance taken by the Government not to renew the Barrick Niugini Limited (Canada) SML on Pogera Mine. Mr. Duma said that the historic and correct decision made by the National Executive Council based on the advice of Mining Advisory Council (MAC) and announced by the Prime Minister, James Marape must be applauded by all Papua New Guineans. According to Minister, Barrick Gold (Canada) and Zijin Mining (PRC) have always been aware that the Special Mining Lease held by the Porgera Joint Venture (PJV), of which they are partners, would expire on the 16th of August 2019. In fact, Barrick Gold in June 2019, sought declarations from the National Court that the SML would continue in force and that PJV could continue mining operations beyond the 16th of August 2019, and until the determination of its application for an extension of the SML. The National Court on the 2nd of August 2019, held that the Porgera SML would continue after the 16th of August 2019, but subject to and pending the determination of the SML extension application by MAC. Barrick Gold and Zijin Mining therefore knew all along that their application for an extension of the SML would be determined by the MAC, and that there was no guarantee that the SML would be extended. [12]

Former PNG Prime Minister and senior statesman, 81-year-old Sir Julius Chan, is suggesting an economic recovery strategy to be implemented by the State immediately to combat the impacts of COVID-19. According to former PM, the current Government needs to provide dependable information on the economic crisis provoked by COVID-19, thus, it must immediately provide a focus on expenditures and the level of debt the country has as well. He said with facts indicating that 80% of the country’s total value of exports come from oil, gas, gold and copper and 20% from agriculture, including forestry and fisheries, the government needs to immediately analyze and strategize a rescue plan. He explained that exporting oil and gas following the COVID-19 pandemic will not benefit the economy due to the global price drop, therefore, another commodity must take lead with total revenue generation and suggested gold. [13]

Ok Tedi Mining Limited (OTML) Chairman Sir Moi Avei announced that the Company has declared an interim dividend of PGK150 million (US$42 million). Sir Moi noted that the dividend was a direct result of the strong performance of the Company during the first seven months of the year where an after tax (and unaudited) profit of US$140 million was generated. Sir Moi added that it is fortunate that the second half of the year will be particularly challenging noting that while operations, which were temporarily suspended on the 5th of August 2020 and planned to resume on 14 September, will not be at full production levels for several months. In turn, OTML Managing Director and Chief Executive Officer Mr Musje Werror announced that the OTML Board had approved an updated strategic business plan that includes an extension of mine life from 2026 to 2029. [14-15]

Wapenamanda Member of Parliament and former Foreign Affairs Minister Rimbink Pato stated that the cost of the project was a NZ$25 million (PGK57.5 million) and its financing by New Zealand and Australia. According to Mr. Pato, project would light up 5,500 households, schools, health clinics and other public buildings in the populous valley. Wapenamanda MP also marked that the project was the first phase of the PNG electrification partnership with Japan, New Zealand and the United States to deliver electricity to households. It is planned to connect 70% of PNG households to electricity by 2030. The project commitment was given by Australia, Japan, NZ and the United States during the Apec leaders’ summit in Port Moresby in 2018 to provide US$2.5 billion (PGK8.7 billion) for the project. [16]

On the 3rd of September 2020 was signed of a deal between Pasca’s operator Twinza Oil Ltd (Australia) and the Gulf provincial government. The Pasca gas and condensate which will be the country’s first offshore project, is located 95km from Gulf’s coastline and 265km west of Port Moresby. Twinza Oil’s Executive Chairman and Chief Executive Officer Ian Munro said the firm looked forward to making a difference to the country in terms of power generation and also domestic market obligation. In turn, Gulf Province Governor Chris Haiveta said the provincial executive council (PEC) established two entities with the intent to take part in investment opportunities created by resources projects. [17]
The National Executive Council (NEC) has approved the release of PGK200 million (US$56,65 million) to be used as relief support for small and medium enterprises (SMEs) and other small businesses in the country, Commerce and Industry Minister William Duma says. According to Minister, PGK100 million (US$28,3 million) would be allocated to Bank South Pacific (BSP) while the National Development Bank (NDB) would be given K80 million (US$22,66 million) to assist the small businesses. The other PGK20 million (US$5,6 million) would be parked under the Commerce and Industry Department to help with administration and monitoring purposes. [18-19]

The Independent Consumer and Competition Commission (ICCC) has rejected a proposal to merge Air Niugini’s Link PNG and PNG Air because of concerns regarding monopolisation of the country’s airline industry. Air Niugini and PNG Air are two major players in the PNG domestic market. [20-21]
[1] https://www.thenational.com.pg/tighten-your-belts/
[2] https://www.thenational.com.pg/house-to-debate-on-supplementary-budget/
[3] https://www.thenational.com.pg/mini-budget-targets-revenue/
[4] https://www.thenational.com.pg/money-plan-fails-to-address-covid-19-issues-lelang/
[5] https://postcourier.com.pg/central-bank-oppose-govt-bid/
[6] https://www.thenational.com.pg/grim-outlook-forecast/
[7] https://www.thenational.com.pg/marape-sets-deadline-for-talks/
[8] https://www.thenational.com.pg/doubters-baffle-marape/
[9] https://postcourier.com.pg/state-will-meet-landowners-says-marape/
[10] https://postcourier.com.pg/porgera-landowners-present-petition-to-opposition/
[11] https://postcourier.com.pg/sir-peter-hits-back-at-opposition/
[12] https://postcourier.com.pg/duma-png-must-determine-its-own-future/
[13] https://postcourier.com.pg/sir-julius-suggests-exporting-gold-to-raise-revenue/
[14] https://kalangfm.com/news/ok-tedi-declares-interim-dividend-extends-mine-life-956
[15] https://postcourier.com.pg/ok-tedi-declares-k150-million-interim-dividend/
[16] https://www.thenational.com.pg/electrification-project-on-hold-due-to-covid-19-says-mp/
[17] https://www.thenational.com.pg/partners-sign-electricity-deal-to-light-up-gulf/
[18] https://www.thenational.com.pg/govt-approves-k200mil/
[19] https://postcourier.com.pg/k200m-bailout/
[20] https://www.thenational.com.pg/iccc-rejects-merger-plans/
[21] https://postcourier.com.pg/png-air-shares-purchase-bid-declined/

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