ADB: PNG Economy Need Projects
by PNG Business News - October 13, 2021
Photo credit: Asian Development Bank
According to the Asian Development Bank, Papua New Guinea's economy will remain difficult in the short term until some resource projects begin (ADB).
Edward Faber, a country economist with the Asian Development Bank in PNG, said the country was presently dealing with a variety of challenges, including the impact of the Coronavirus (Covid-19) epidemic, a foreign exchange deficit, and national elections next year.
He recently spoke at a symposium in Port Moresby on EU-PNG business, trade, and investment.
According to Faber, PNG's economy would be worth around US$23.7 billion (K81 billion) in 2020, with the mining sector accounting for a quarter of the total, helping to fuel considerable growth across the board.
“In 2020, the growth forecasts had been to be about two per cent pre-Covid-19, so that was still seen to be relatively subdued and weak,” Faber said.
“There’s no major investment, no major mega projects generating growth and also a number of impediments including foreign exchange shortages and infrastructure.
“With the Covid-19 pandemic effects, growth was then revised between negative three to four per cent.
“So as we take a closure look at 2020 then, the major sectors to show contraction were accommodation and food services, transport and stage, trade, construction and elsewhere.
“These sectors being specifically impacted by the lockdowns, restriction to movement of people and goods and weaker international demand for Papua New Guinea's exports and difficulties with having imports.”
The mining industry, according to Faber, was the most affected by the shutdown of the Porgera mine, while the Ok Tedi mine was shut down for roughly six weeks and the Lihir mine reported lower output.
Bright spots, said Faber, include the planned reopening of the Porgera gold mine and other big initiatives in the works, such as fiscal changes.
Reference: Luma, Dale. The National (12 October 2021). “Economy needs projects: Bank”.
PNG Business News - April 12, 2021
Talks With Asian Development Bank Start
Treasurer Ian Ling-Stuckey has started talks with the Asian Development Bank (ADB) on the goals for the ADB's $US2.2 billion in funding over the next four years. After a virtual meeting with ADB country director David Hill, the treasurer said the Marape Government needed to continue its emphasis on the war on coronavirus while also developing the foundation for a more sustainable economy through initiatives like PNG Connect. “At stake, this year is $US691 million, with a further $US1.5 billion through to 2024, consisting of direct budget support and project financing,” he said. “The financing is all on extremely concessional terms with most of it at interest costs of less than 2 per cent, eight years before having to repay back any of the loans, and 30 years to repay the loan. The ADB goes through internal assessment processes which aim for a rate of return on projects of at least 12 per cent. The loan costs PNG 2 per cent and the economic rates of return are 12 per cent or more – this is the basis for future growth.” Follow-up talks, according to Ling-Stuckey, have already begun and will proceed in the coming weeks. The focus will be on a variety of topics, including: Other organisations and sponsors could be able to help supplement the ADB's funding. Details on various steps to help the coronavirus war, including spending transparency. Meeting the government's obligations under the State-Owned Enterprise Reform Program, which has a budget of $US150 million this year. The Sustainable Highlands Highway Investment Program, the Civil Aviation Sector Development Program, the Power Sector Development Programme, the Urban Water Supply and Sanitation Project, and the Improved Technical and Vocational Education and Training for Employment Project are all making progress on more conventional infrastructure programs. On-Lending Agreements for State-Owned Enterprises, where there are ongoing debates about whether the National Government can bear the debt of financially sustainable SOEs.
PNG Business News - April 29, 2021
Marape Thanks ADB
The Asian Development Bank (ADB) has been thanked by the Prime Minister for its long and constructive support for PNG's development. PNG's main multilateral financing partner, the ADB, has been active in the country's growth for 50 years. Prime Minister James Marape, Treasurer Ian Ling-Stuckey, Finance Minister John Pundari, Works Minister Michael Nali, Health Minister Jelta Wong, and Asian Development Bank Country Director David Hill met recently. In the future, the Prime Minister demanded that ADB continue to assist the government and citizens of PNG in the transportation and health sectors, as well as in the energy and education sectors, as well as with much-needed State-Owned Enterprise reforms. The Treasurer emphasized the importance of the ADB's friendly international assistance in dealing with the global COVID-19 pandemic. He thanked the ADB in particular for the massive growth in project funding in recent years, which he credited to increased national budgeting and counter-part financing, as well as the $US500 million in budget assistance in 2020. The Treasurer noted that the project loans under consideration are aimed at fostering a more prosperous and sustainable economy. The average rate of return is projected to be 12 per cent per year, with interest expenses of just 2% per year, resulting in annual growth of 10%. The transportation and health sectors were also discussed in depth. Minister Nali outlined the goals of the Marape administration's "Connect PNG" transportation sector plan, which is being developed by the ADB's newly approved "Transport Sector Preparatory Project" Project Readiness Facility for PNG. The Trans-island Highway (Port Moresby to Lae), the Momase Highway (Somare Highway), and an expansion of the Highlands Highway and feeder road network west of Mt. Hagen will all be studied and designed as part of this initiative. The project to rehabilitate and sustainably preserve 430 kilometres of the Highlands Highway, which was moving along nicely, was also discussed. There was some talk on how to improve the efficiency and quality of work of some contractors. Minister Wong addressed the Health Services Sector Development Program, which is funded by the Asian Development Bank, as well as the COVID-19 assistance that the bank will provide in late 2020. Given the progress of these projects, Prime Minister Marape has asked the Asian Development Bank (ADB) to propose a new health-related initiative to fund the building of 15 provincial hospitals.
PNG Business News - July 08, 2021
ADB Endorses 5-Year Strategy
As the 12 smallest Pacific island countries (PIC-12) recover from the immediate shock of the (COVID-19) pandemic, the Asian Development Bank has endorsed a new 5-year strategy aimed at building resilience against economic shocks, delivering sustainable services, and promoting inclusive and sustainable growth. The Cook Islands, the Federated States of Micronesia, Kiribati, the Marshall Islands, Nauru, Niue, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu are all members of the Pacific Approach, which runs from 2021 to 2025. Fiji and Papua New Guinea, which have larger economies, have their own national partnership plans that drive ADB activities. “ADB’s work in the Pacific has evolved due to the massive changes brought on by the COVID-19 pandemic and this new Pacific Approach reflects those ongoing strategies while adopting a new and tailored approach to every element of our work in these countries,” said ADB Director General for the Pacific Leah Gutierrez. “This new and tailored approach to our work is also motivated by the growing frequency and intensity of climate change and natural hazards in the region.” The ADB will assist the PIC-12 in enhancing public financial management and health systems, as well as catastrophe risk mitigation and economic recovery, as part of the strategy's first goal of increasing resilience to shocks. The ADB will continue to fund essential energy, transportation, and urban infrastructure, as well as assist utilities in managing assets more sustainably, under the second goal of delivering sustainable services. The third goal, promoting inclusive growth, will see the ADB expand its private sector operations in the region, assisting the PIC-12 in strengthening their business environments, increasing access to finance for micro, small, and medium-sized businesses, and assisting in the development of social protection systems for the most vulnerable. To address rising funding needs, the ADB's portfolio for the PIC-12 will rise from $568 million in 2015 to a projected $1.34 billion in 2021. The increased funding necessitates new approaches to ADB's portfolio implementation. As a result, the strategy focuses on increasing efficiency and sustainability while growing the portfolio and functioning in the particular operational contexts of tiny island developing states. To achieve these goals, the strategy introduces new operational priorities, such as a new regional climate strategy, a growing focus on gender equality, increased procurement and contracting flexibility, and a greater focus on long-term capacity development for the public and private sectors across the region. By taking a strategic, interdisciplinary, and whole-of-country approach to investments and sector planning, the strategy will enhance ADB's assistance for climate change and disaster risk management. By including gender considerations into project designs and fostering policy discourse on gender inclusivity, the Pacific Approach will improve gender equality in all 12 small island governments. A new private sector plan for the region will be implemented by the ADB, with an emphasis on renewable energy, financial institutions, tourism, and fisheries. The Private Sector Development Initiative, co-financed by the Asian Development Bank and the governments of Australia and New Zealand, aims to reduce the cost of doing business by modernizing business laws, improving credit access, reforming state-owned enterprises, and providing support to women be part of the successful economy, Importantly, the strategy takes a longer-term approach to capacity building. All ADB support in the PIC-12 will involve capacity building. Capacity supplementation—the practice of posting long-term specialists in essential sectors—will also be introduced by the ADB to guarantee that expertise is preserved beyond the lifespan of a project. Partnership development will continue to be a top goal. The ADB will continue to work with the Australian, Japanese, and New Zealand governments, as well as the World Bank and other development partners. The Pacific Approach for the Years 2021–2025 was developed in close collaboration with Pacific governments, development partners, civil society, and the corporate sector. It reflects the aims of Strategy 2030, the Asian Development Bank's broad vision and strategic response to Asia and the Pacific's evolving requirements, and the bank's specific focus on small island developing nations and fragile and conflict-affected countries. The Asian Development Bank is dedicated to building a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while continuing to fight extreme poverty. It was founded in 1966 and is owned by 68 people, 49 of them are from the region. Reference: EMTV Online (1 JUly 2021). “ADB Endorses New Strategy for Pacific Small Island Developing States”.
PNG Business News - October 26, 2021
Australia buys Digicel, PNG’s mobile monopoly
Photo credit: Devpolicy by Stephen Howes Yesterday, Telstra announced that it was buying Digicel Pacific. Telstra itself is only paying $270 million, and the Australian government $1.33 billion. Yet, Telstra is obtaining 100% ownership. The deal is certainly an attractive one for Telstra. But does it make sense for Australia, and for the Pacific? Digicel has had a transformational impact in the Pacific, but now has too much market power. As the Telstra release explains, it holds the dominant position in all the Pacific countries in which it operates, except for Fiji, where it is in second place. In Papua New Guinea, which I know best, and which is by far Digicel's biggest market, the company has a 92% share of the mobile phone market. That makes Digicel effectively a monopoly in PNG. And that is why it is so profitable: like any monopolist, it exploits its market power. Australian and PNG researchers have been tracking mobile internet prices in PNG since Australia gifted it a new underwater cable . Their conclusion is that since the completion of that cable in December 2019 to today there has been no decrease in mobile internet prices. The reason is simple: the lack of retail competition. Michelle Nayahamui Rooney, Martin Davies and I last year exposed Digicel PNG’s predatory loan scheme. Digicel lends phone credit to its customers. They pay it back when they next top up. Our estimate is that Digicel made a 17% return from such loans every week, which is equivalent to an unbelievable 351200% a year. Is this really the way in which Australia want to engages in the Pacific – owning an enterprise that keeps prices high for consumers, and rips them off when they are desperate to make a call? Any monopolist is necessarily engaged in a battle between the consumer and their profits. At some point, Telstra will end up going toe-to-toe with the PNG telecom regulator, NICTA, as Digicel has done several times. It’s going to be awkward for both Telstra and the Australian government. Many will welcome the investment as a sign of Australian commitment to the Pacific. However, if we want to invest in the telecom sector in the Pacific, we should be backing alternatives to Digicel, to push prices down and improve services, not buying out the dominant player. Amalgamated Telecom Holdings based in Fiji is the Pacific’s second biggest telecom provider. It is currently planning to enter the PNG mobile market with support from the Asian Development Bank. This is the sort of investment we should be financing. That Australia has bought Digicel shows the extent to which the Pacific is now viewed through a China lens. That’s unfortunate. China is a massive economic power. Its companies will have increasing stakes in economies around the world. That is a fact we have to accept. The Australian government also needs to decide if its only goal is to counter China or if it is still seeks to promote Pacific development. When I was AusAID's Chief Economist, Digicel was the new kid on the block in the Pacific, and it was successfully challenging state-owned telcos that until then had been dominant. In 2006, in Foreign Minister Alexander Downer's flagship Pacific 2020 report, we wrote glowingly about the competition that various Pacific countries had recently started allowing in the mobile phone sector. Our analysis was right then, and remains relevant today. Yet here we are, in 2021, doing the opposite: rather than supporting greater competition in the telecom sector, subsidising the purchase of the incumbent monopolist. The decision to buy Digicel Pacific should be reversed. If it is too late for that, the Australian government should at least – in return for all its cheap and risk-reducing finance – oblige Telstra to operate Digicel for the benefit of the people of the Pacific rather than solely for its shareholders through an agreement that makes it clear that the Australian company is not only expected to return the cheap loan it has been given, but also reduce prices, and end rip-offs. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.
PNG Business News - October 26, 2021
Taureka Replaced As Managing Director
Isikeli Taureka's position as managing-director (MD) of Kumul Consolidated Holdings (KCH) was terminated by the National Executive Council (NEC) recently. Professor David Kavanamur has been appointed as interim MD until a permanent appointment is made, and Moses Maladina, the current chairman of PNG Power Ltd, has been named as acting chairman. Taureka was removed after 20 months, according to Prime Minister James Marape, due to poor performance by KCH and State-Owned Enterprises (SOEs) and missed national project deadlines. “The reforms of the SOEs were endorsed by the Government in October 2019,” he said “We see it as the most-significant reform programme to be undertaken by any Government since the corporatisation of the state utilities and the creation of the Independent Public Business Corporation (IPBC), now KCH. “Building governance and accountability must go hand in hand with successful project execution. These are viable projects that can fundamentally change the accessibility and affordability of services and benefit the welfare of our people. “Extensive unexplained delays to major projects by KCH and SOEs are not acceptable. The Government understands that SOE issues cannot be immediately resolved as they take time. “That is why the NEC provided well over a year for KCH to work with SOEs to support the development and execution of strategies. We had hoped more would have been achieved during Taureka’s tenure. We regret to take the difficult step of severing the MD’s appointment. However, the NEC felt it had to be done. “The Telikom merger and partial privatisation with majority ownership and board control to be passed onto the super funds, for example, is one major issue the Government has been pushing since 2019 when we took office. “The merger of Water PNG and Eda Ranu is another matter that has been outstanding and not yet resolved. This merger is to take on a subsidiary structure where 20 percent of Eda Ranu is to be owned by Koiari landowners and 10 per cent each by Central Province and the National Capital District. “This decision was taken in 2019 but has not been implemented to date. “As for PNG Power and its continuous performance issues, these have been ongoing and evident. “These are badly-needed reforms within the SOEs and responsive policies have been launched by the Government, yet, very little or no progress have been made. “Out of respect to Taureka as a leading Papua New Guinea son, I had reached out to him for a meeting but there was no response forthcoming. Hence, the announcement of this decision (termination),” he added. Those nominated to crucial positions, according to Marape, must grasp the larger picture and act quickly to fulfill the government's goals.“For others in key leadership roles, whether as chair, members of boards, departments or agency heads, you are not here to pass the time or warm seats. Everyone must step up. “The Prime Minister’s Department is working to take stock of work done. So, if you feel you have not met your key performance indicators, I suggest you start thinking about resigning before the NEC asks you to leave.” According to Marape, Kavanamur had previously served as the chairman of KCH and had a thorough awareness of the organization's issues as well as the government's goals. Reference: The National (22 October 2021). “Cabinet Axes Taureka”.
PNG Business News - October 26, 2021
Digicel Pacific to be Acquired by Telstra
Telstra has announced that it will buy Digicel Pacific for $US1.6 billion, plus up to an additional US$250 million based on business performance over the next three years, subject to government and regulatory approvals. In its six South Pacific markets – Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu – Telstra, Australia's leading telecommunications and technology company, will continue to invest in and operate the business under the Digicel brand name. Telstra International CEO Oliver Camplin-Warner said the agreement will allow Telstra to expand on Digicel Pacific's regional leadership and increase mobile connectivity in Papua New Guinea. “Denis O’Brien and the Digicel team have built a phenomenal business that’s centred on providing exceptional customer service, the best coverage and leading digital experiences. Telstra will add to these strengths and the team’s local knowledge with our more than one hundred years’ experience connecting the vast expanses of Australia to continue delivering great experiences for Digicel’s customers across the Pacific.” “We have 19.5 million retail mobile customers in Australia and our 4G network is the largest and most reliable in country. It covers some of the remotest parts of Australia – from the coast, to the outback and the Torres Strait Islands, just off the coast of Papua New Guinea. And we’re in the process of building Australia’s largest 5G network that now stretches to more than 240 towns and 75 per cent of the population,” Camplin-Warner said. There will be no employment losses in the region as a result of the transaction, and the present Digicel Pacific team will continue to manage the company on a day-to-day basis. Denis O'Brien, the current owner of Digicel, will continue on the Board of Directors. “We will invest our know-how and capital to further expand coverage and over time bring the benefits of 5G to Papua New Guinea. But we’ll retain the same Digicel brand the people of PNG know and love today with the same team and services they have come to rely on,” Mr Camplin-Warner said. The purchase, according to Camplin-Warner, is in line with Telstra International's expansion plan, which now comprises operations in 20 countries outside of Australia and thousands of clients, including businesses, governments, and some of the world's largest technology firms. “Beyond Australia Telstra also has the most extensive subsea telecommunications cable network in the Asia Pacific. And we’re one of the biggest providers of voice and data services connecting the South Pacific to the rest of the world through our Southern Cross cable.” “Network traffic is growing faster than at any other period of time and digital technology is changing our world. We are at the centre of this, and so is Digicel Pacific. We are committed to delivering the best technology on the best network for PNG,” Mr Camplin-Warner said. The people and businesses of PNG will benefit from Telstra's experience rolling out a world-class 5G network and connecting diverse geographies, according to Colin Stone, CEO of Digicel Papua New Guinea. “Telstra’s network innovation has played a critical part in Australia being ranked first in the global Mobile Connectivity Index which assesses networks based on performance, affordability and availability. We look forward to working with Oliver and the Telstra team,” Mr Stone said. The two firms' ideals, according to Camplin-Warner, were likewise matched. “Digicel Pacific and Telstra are both committed to building a connected future so everyone can thrive and this includes supporting some of the most vulnerable in our communities.” “Digicel Pacific has taken community development to the next level through the Digicel Foundation’s investment in health, education and community-based programs. We look forward to continuing this work, just as we do today with the Telstra Foundation and its commitment to using technology to support young people and help to reduce the digital divide.” “We will also bring a commitment to addressing climate change to help drive better environmental outcomes for the people of PNG,” Mr Camplin-Warner said. Despite the fact that the transaction is funded by the Australian government, Telstra will remain the only owner and operator of the company. Reference: Loop (October 25, 2021). “Australia’s biggest telecommunications company to acquire Digicel Pacific”.