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Investment Condition Critical

by PNG Business News - May 12, 2021

According to an economist, improving benefit-sharing agreements for resource programs necessitates a thorough understanding of the future gains from those projects as well as the conditions offered in other countries.

The government "owns the assets and is the regulator," according to Paul Barker, executive director of the Institute of National Affairs.

“So, it is in a strong position to negotiate on its own terms and benefits on behalf of other stakeholders, notably the customary landowners,” he said.

However, he cautioned the government to be wary of possible contradictions between its regulatory position and that of potential shareholders, especially on social and environmental issues.

The Wafi-Golpu in Morobe, Papua LNG, P'nyang, the Pasca A offshore oil and gas, Frieda River copper and gold, Woodlark and Porgera are only a few of the billion-kina resource ventures that have yet to get off the ground in PNG.

“It should, generally, avoid the need to commit to costly equity participation entailing major upfront commitments and heavy borrowing by the State,” Barker said.

He said the Government “clearly has more important duties to its citizens with its limited resources, notably providing basic quality infrastructure and services”.

“Equity in corporate ventures is more of a luxury when public goods are as poor as they are in PNG,” he said.

“And when the State is able to secure sound revenue through taxation and other mechanisms and benefit-sharing arrangements, so long as over-generous investment incentives have not been offered.

“Acquisition of equity should occur particularly in diverse investments overseas and at home, rather than domestic extractive projects with limited life-spans.

“And it should be made through a well-managed and accountable sovereign wealth fund, rather than from up-front borrowing – that is, from savings rather than costly commercial borrowings.

“Awareness of the realistic project returns are also crucial when recognising the potential investors negotiating position, with respect to its other global options,” Barker said.

“Papua New Guinea needs to have competitive investment conditions if it wants international (and domestic) investors to develop projects or other goods and services, but clearly it doesn’t want to be taken for a ride with unduly generous conditions, which provide inadequate benefits to the State, or the public it serves.”



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PNG Business News - June 14, 2021

Foreign Direct Investment Decreases By 45 Percent

According to the Investment Promotion Authority, foreign direct investment into the nation has decreased by around 45 per cent in the last two years (IPA). Investment interest plummeted from over 1,000 in 2019 to roughly 300 in the first quarter of this year, said managing director Clarence Hoot. “Global FDI (foreign direct investment) outflow has drastically reduced by 45 to 50 per cent,” Hoot said. “(It) means for us that foreign direct investments will have to be more than 10 times or 20 times than what we are currently doing. We have to relook at ourselves, what we have in place, what we want and where we want to be.”  “We have witnessed a decline of 40 to 45 per cent in terms of FDI interest coming to PNG,” Hoot added, speaking from the perspective of a regulator. “In 2019, the total number of foreign direct investment documents that we received was 1,116. In 2020 that reduced to about 800. And in the first quarter of 2021, it is 300. From IPA perspective, that is a real concern.   “While we appreciate that it may be a direct result of the impacts of the Covid-19, I think we should look beyond the Covid-19. We also have to look at what we have in terms of domestic policies, laws and regulations,” Hoot said.   He also stated that there were indicators that PNG's standing in terms of business-friendly locations has decreased. PNG was ranked 108th out of 190 countries in 2018/2019. It dropped 12 positions to 120/190 in 2019/2020.   Reference: Mauludu, Shirley. The National (9 June 2021). “Foreign investment drops by 45pc”.

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PNG Business News - June 15, 2021

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PNG Business News - June 15, 2021

PNGEITI Praises Open Dialogue to Reopen Porgera Mine

The PNG Extractive Industries Transparency Initiative (PNGEITI) has praised the open stakeholder dialogue culminating in reaching consensus to re-open the Pogera Mine in Enga.  Parties in April this year sanctioned a “Framework Agreement for the New Pogera Project” which spells out the roadmap to reopen the mine. Mark Bristow, CEO and President of Barrick Gold last week explained key elements of “Framework Agreement for the New Pogera Project” at a public forum at the Piam Oval in Pogera witnessed by PNG Prime Minister James Marape, landowners and other leaders. In the new agreement, PNG stakeholders will together own a 51 % equity stake in the mine while Barrick Niguini Limited (BNL), a joint venture company in which Barrick and Zijin Mining Group each own 50% will hold 49 %.  BNL will remain the mine operator. At the end of the first ten year period, the PNG stakeholders will have the option to purchase BNL’s 49 %    PNGEITI Head of Secretariat Lucas Alkan remarked that the open discussion throughout the negotiation process on the part of the mine operating lead, Government and landowners has culminated in this agreement signed happily by all parties.   “We at the PNGEITI congratulate the Government and the project lead Barrick Gold and other stakeholders for reaching a consensus decision to reopen the mine. “Pogera has been an economic powerhouse for many years and people in the country have been waiting for the outcome. “We commend the Prime Minister, the President and CEO of Barrick Gold Mr. Mark Bristow for the leadership in ensuring that the negotiations were done in the transparent and open manner. “PNG Extractive Industries Transparency highly encourages such openness in the negotiating process for resources benefits and importantly the responsibilities that each stakeholder must take on to ensure smooth flow of proceeds. “We look forward to working with the Government and the project operator in the areas of transparency and accountability to help derive best value for all stakeholders. PNGEITI commitment to reporting on developments in the mining and petroleum space is becoming stronger with new reporting dimensions taking shape as we making progress in promoting transparency and accountability in the PNG mining and petroleum industry” Mr. Alkan said.

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PNG Business News - June 14, 2021

BPNG Goes For Review

Treasurer Ian Ling-Stuckey has revealed the terms of reference for a review of the Bank of PNG, as well as the members of the review panel. Former Chief Secretary Robert Igara will lead the study, which was planned in the Supplementary Budget for 2020. Former central bank governor Sir Wilson Kamit and Australian professor Dr Stephen Howes are the two members. “These very eminent people, all of whom have detailed experience of the PNG financial system and reform, will be working to a term of reference approved recently by the NEC,” Ling-Stuckey said. “It is the first review of the central bank and the Central Banking Act 2002 since Sir Mekere Morauta’s financial system reforms when he was prime minister from 1999 to 2002.  “Much has changed since then, and the effects of the coronavirus pandemic, along with substantial technological advances, have made the need for a review even more urgent.  “The aim is to modernise the bank and the legislation in line with international developments, and make it more responsive to prevailing circumstances while preserving its independence.”  The study is scheduled to be finished in time for Parliament's November session. “An independent advisory group was also established by the late Sir Mekere when looking at the changes that led to the Central Banking Act 2000,” he said. “Igara, currently the University of Papua New Guinea chancellor, was chief secretary at the time, and Sir Wilson was the governor of the Central Bank. “Prof Howes, head of the Development Policy Centre at the Australian National University, has long been involved in PNG research and advice and consultation, particularly in relation to national development.”   Reference: The National (8 June 2021). “BPNG going for review”.

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