Partnership Between IFC and PNGX to Deepen Papua New Guinea’s Capital Market, Help Accelerate Economic Growth
by PNG Business News - May 17, 2022
Photo credit: PNGX
Papua New Guineans stand to benefit from a modernization of the nation’s capital market that’s expected to boost investment, accelerate economic growth and help support a sustainable economic recovery.
Under an agreement announced today, IFC, a member of the World Bank Group, will work with PNGX Markets Limited, the national stock exchange of Papua New Guinea (PNG), to deepen the nation’s capital market and boost access to long-term financing for companies in PNG. IFC will provide additional advisory services to PNGX, including reviewing its listing rules and other technical elements related to the issuance of corporate bonds.
“We are pleased to be drawing on IFC’s global expertise to help develop PNG’s capital market,” said PNGX Chairman David Lawrence. “This crucial program is creating the potential for PNG investors and debt issuers to participate in a well-regulated, efficient and transparent corporate bond market, laying the ground for more international investment into the country and increased economic development across the nation.”
The reform program will pave the way for the issuance of green and sustainability-linked bonds (SLBs), enabling PNGX to tap the rapidly growing sustainable debt market. Green bond issuance surpassed US$1.5 trillion last year, reflecting surging appetite among investors.
“The market is still in its infancy in many emerging economies, or even non-existent, and so we are pleased to see PNGX taking steps that will see it offering sustainable investment options,” said Paramita Dasgupta, Manager, East Asia and Pacific, IFC Regional Advisory Services – Creating Markets. “We need to build the capacity of capital markets, which are crucial conduits for investment and economic growth and are also an absolutely essential tool to finance the transition to net zero. That means rolling out green bonds, sustainability-linked bonds and other sustainable debt initiatives much more broadly.”
IFC will also provide an expert education program relating to the development of environmental, social and governance (ESG) rules which will help create appropriate disclosure standards for PNGX and its companies. This latest development comes after PNGX announced in April it had joined the United Nations Sustainable Stock Exchange initiative. Other areas of expert training will encompass board gender diversity. Strengthening PNGX’s ESG standards will lay the foundations for a new corporate governance code that, importantly, will factor in gender.
“Our work with PNGX will also help enable PNG companies to operate in line with global best practices, helping their corporate debt and equity become an attractive investment for international investors,” said John Imbal, PNG-based Operations Officer, East Asia and Pacific, IFC Regional Advisory Services – Creating Markets. “Environment and social governance disclosure is becoming mainstream for listed companies around the world, and many are now including the disclosures in their annual reports. This is because investors expect it and can then use them as part of their assessment of a company’s performance.”
As part of the ongoing initiative to develop the PNG bond markets, IFC and PNGX are already strengthening the market’s legal and regulatory framework, modernizing bond market infrastructure and providing training and education for regulators and market participants.
Article courtesy of PNGX
PNG Business News - August 23, 2021
PNG Stock Market Worth Over K120 Billion
Photo Credit: PNGX According to the PNG Securities Commission, the stock market in PNG is now worth over K120 billion. The PNG National Stock Exchange presently has 13 firms listed, according to acting executive chairman Robert Minak (PNGX). “The total market cap fluctuates around K120 billion,” he said. “The market tracks well and it’s steady all the time for those 13 companies despite the challenges posed by the Coronavirus. “Trading has been slow but steady.” Minak stated this after Zimcare Ltd HR Consultants presented the commission with a report on the organization's audit. The purpose of the audit was to verify that the commission took stock of its operations and that the appropriate personnel were carrying out their allocated duties. “They are elite corporations that have billions of kina,” Minak said. “They hire the best people in the world. “And for the securities commission to challenge or regulate them with people that are not qualified or skilled, is a joke. “We felt that it was fundamental that we get it right from the start. “So we had to hire Zimcare. “They (had done) the organisational structure for the securities commission so they know the commission (well). “We got them to come and fix up things that have gone wrong along the way.” Meanwhile, Minak said the country’s stock market could make money for the Government like other stock markets in the world. “The (PNG) Government does not have the money,” he said. “It gets it from the banks within or goes out and borrows. “The commission regulates an industry where the Government or anyone else can raise money from an alternative source. “In other countries, the securities commission makes money that contributes to the budget.” Reference: Mauludu, Shirley. The National (13 August 2021). “Stock market worth K120bil”.
PNG Business News - August 30, 2021
PNGX and Securities Commission Sign MoU
Photo Credit: PNGX PNGX Markets Limited, Papua New Guinea's national stock exchange, and the Securities Commission of Papua New Guinea (SCPNG) have signed a Memorandum of Understanding on the preservation of an orderly market for listed securities. The Securities Commission may make public remarks regarding a listed business from time to time in the course of its duties and responsibilities that a reasonable person would anticipate to have a substantial impact on the price or value of the listed company's securities. Making such remarks during trading hours (10 a.m. to 4 p.m.) might jeopardize an orderly and fair market in such assets. The MoU intends to foster collaboration between the Securities Commission and the PNGX in order to support the effective performance of their respective duties and responsibilities, as well as the preservation of orderly and fair markets in Papua New Guinea. According to the MoU, the Securities Commission will avoid making public statements about a listed company that a reasonable person would expect to have a material effect on the price or value of a listed company's securities during trading hours, to the extent that it is reasonably practicable to do so. If it is not possible to avoid making such public remarks during market hours: Prior to issuing the relevant public statement, the SCPNG will inform PNGX; PNGX will impose a trading stop on the relevant listed company's securities; and SCPNG will provide PNGX with a copy of the relevant public statement for distribution to the market as soon as feasible. “It is fundamental that regulatory governance systems are established to ensure a fair and orderly market,” said Robert Salmon-Minak, acting executive chairman of the Securities Commission. “This MoU recognises and respects the differing but complementary roles of the Securities Commission and PNGX in achieving that outcome. “The capital market regulator in any country plays a critical function in the economy of that country,” said PNGX chairman, David Lawrence. We are pleased to be working with the Securities Commission to put in place processes that promote confidence in the PNG capital market.” Reference: Post-Courier (27 August 2021). “Securities Commission, PNGX Sign Agreement”.
PNG Business News - April 08, 2021
Commission Places New Levy on Transactions
The Papua New Guinea Securities Commission has placed a new levy for all trades on the PNG Stock Exchange, the country's stock market (PNGX). The Securities Commission adopted the new levy on February 8 and it went into effect on March 8, according to PNGX chairman David Lawrence. Each buyer and seller are expected to pay an extra 0.75 per cent of the sale value to their stockbroker. He said that the stockbroker was required to pay the money to PNGX on a monthly basis and that PNGX was then required to pay the money to the Securities Commission on a monthly basis. PNGX was worried that the levies would disincentivize business competition at a time when it was attempting to build it up from a low base, according to Lawrence. Buyers and sellers, he added, were immune to paying the levies for on-market purchases. “We have also heard that some buyers and sellers are giving consideration to off-market transfers of listed securities rather than executing orders through the market, as off-market transfers will not be subject to the levies,” he said. PNGX has urged the Securities Commission to notify the public of its plans to reclaim any outstanding levies from investors and sellers, as well as its views on off-market transfer activities, according to Lawrence. “PNGX is concerned that the imposition of the levy at this time is counterproductive to the development of the capital markets in PNG and not aligned with the Government’s financial sector development strategy (FSDS) to create an environment that is equal in its competitiveness to the ASX,” he said. He expressed concern about the possible impediments generated by the levy, which he defined as follows: Both Investors' trader fees will be increased. This would have a negative effect on investment returns, particularly superannuation investors. It would also give other more developed foreign markets in the area and more established international markets an unexpected competitive edge. Detract from Papua New Guinea's investability; Encourage PNG-incorporated businesses to list on existing foreign exchanges with lower sovereign risk; Encourage the expansion of "off-market" transactions, decreasing the disclosure, pricing, openness, and investor rights inherent in the formal, controlled PNGX market, to the detriment of PNG's domestic and international investors. According to Lawrence, the outcomes could decrease competition in an already illiquid sector, eliminate incentives for market development, and raise the cost of financing for PNG companies and the government.
Paul Oeka - September 29, 2022
AGRICULTURE HAS HUGE ECONOMIC POTENTIAL
Photo credit: Oxford Business Group The creation of the new ministries by the current government for both major agricultural commodities, Coffee and Oil Palm is a huge step forward in achieving the agriculture sectors economic potential. For the past years the agricultural sector had not been fully utilized by consecutive governments as the focus had mostly been centered on the extractive industry and Mining & Petroleum sector. This important and vital sector is eventually and currently being recognized as an economic pillar to boost the state coffers. Prime Minister Hon. James Marape said the allocation and restructure of the four newly created ministries concentrating on Horticulture (Fresh produce), Coffee, Oil Palm, and Livestock to the agricultural sector is a complete paradigm shift to get agriculture moving again. The focus of the Marape Government on ‘Taking Back PNG’ is deeply rooted and aligned with the mechanisms and functions of the agricultural sector as most of the country’s population are situated in rural settings and largely depend on subsistence agriculture to sustain themselves. Coffee, Cocoa, Oil palm and Fresh produce have been a mainstay that this rural population rely on for income for so many years. As far as many Papua new Guineans can recall and relate, Agriculture has always been the foundation and backbone of the country and it can surely drive the economy forward. Although the agricultural does not match in monetary turnovers for the country, it is an economic foundation and is here to stay. In comparison over monetary benefits with other sectors, Agriculture had not been performing to expectation due to so many underlying issues concerned and faced with the value chain of agricultural commodities prompting a decline in agricultural activities over the years. The Prime Minister said it was no secret that agriculture had declined since independence in 1975, and the current allocation of the four agricultural ministries was to revive the sector for it to be a major income generator for PNG. PM Marape said this when explaining the concept and rationale for his allocation of four ministries to the agricultural sector. This direction by the Marape/Rosso Government to emphasize more on agriculture will boost agricultural activities in and around the country. Mostly the sector had not been given proper recognition for decades and had been lacking government intervention from past successive governments. Now with the current Government’s backing, the respective agricultural ministries and its industries are expected to flourish dramatically and are likely to bring more benefits. The new ministries will also empower provinces that currently do not have mining and petroleum resources. This will certainly build stronger local economic activities for future generations. “We want to see import replacement and more exports within the agriculture sector, which is why we have allocated four separate ministries to agriculture,” PM Marape said. The recognition of this agricultural industries will also ease and slowdown rural-urban drift. The number of people migrating from rural areas into towns and cities in search for better opportunities have risen in the past couple of years due to inequality in the distribution of wealth and lack of government services. Thus, the governments focus on agriculture will encourage many unemployed Papua New Guineans living in urban areas to go back to their home Provinces or villages and be self-reliant. As economic opportunities arise in rural areas from vibrant and innovative policy interventions within these newly created agricultural ministries, it will attract many to contribute meaningfully and be productive on their own customary land. Prime Minister Marape said over the last three years prior to the creation of the new agricultural ministries, his government has given millions of kina to support agriculture through price and freight subsidies and SME support. “We are now targeting specific commodities through the establishment of the four ministries. Over the next term of government, we will give specific production targets for Coffee, Oil Palm and all other major agricultural Commodities” he said. The government also plans to revive and rehabilitate once thriving agricultural hubs in the country such as Cattle farming in the Central Province and the Coffee plantations of the Highlands region that produced quality organic Coffee and grew the fledgling industry pre-independence in the 1960’s. Now that the agricultural sector has been categorized into four industries, there will be room for much improvement in economic activity within the agricultural sector as people will start contributing meaningfully to the economy.
Paul Oeka - September 28, 2022
TREASURER WANTS REVIEW OF ELECTION FUNDS
Treasurer Ian Ling-Stuckey is dismayed at how the 2022 National Elections were conducted and is now looking forward to a complete review of the allocated funds that were spent on the elections. Ling-Stuckey recently stated in parliament that the government had allocated and funded enough money for the election process to be conducted this year. “We provided a further K50 million to cover the costs for the 2022 election, bringing the total funding for the election to nearly double the level of expenditure in the 2017 national elections. There was enough money to support a much better election this year, so I look forward to the proposed parliamentary committee examinations of what went wrong and what can be done better” he said. The Treasurer also expressed concern that there was a decrease in the public servants’ salaries. He explained that “Once again there is a salary cost overrun. This is K201 million much lower than in previous years, and out of this, over 70 percent is related to teacher wage overruns. We contributed to bring this area under control. After no pay increases during the latest part of the Covid-19 crisis, it is now time to start increasing some salary payments”. “There is also the need to provide additional funding for the seven new districts that have been created and K3 million each has been provided. There are also new members in existing electorates, and it is appropriate that they be given some funds for commencing programs through to the end of the year. For equity reasons all districts and provinces needed to benefit the same so an additional 2 million per district and province have been allocated bringing the funding back to 10 million per districts and provinces” he said. Meanwhile there was an announcement on Thursday last week that the Department of personnel management, Treasury and Finance are working together to ensure that there will be a three percent pay increment in the salary of public servants. This pay increment is to be adjusted and effective by December this year, the welcoming news for public servants was confirmed by the Secretary of the Department of Personnel Management, Taies Sansan.
PNG Business News - September 28, 2022
PNG’s minimum wage
Commentary by Stephen Howes, Kingtau Mambon and Kelly Samof The urban minimum wage has been an important part of Papua New Guinea’s economic history. In the last few years before independence (in 1975), it was greatly increased. In the decade or so after independence, it was widely regarded as too high. In 1992, it was slashed, merged with the rural minimum, and hardly increased again for more than a decade. We can compare the minimum wage in PNG today with other Asia and Pacific developing countries using International Labour Organization (ILO) data. As Figure 1 shows, PNG’s minimum wage is 18% below the average of the 19 countries shown if the market exchange rate is used to compare minimum wages. It is 37% below the average if differences in cost of living are also taken into account (with conversions made on the basis not of market exchange rates but so-called purchasing power parities or PPPs). The greater difference in terms of PPPs reflects PNG’s relatively high cost of living. Of the countries shown, only Samoa and Kiribati have a lower minimum wage than PNG when a PPP comparison is made. This is very different to the past. Raymond Goodman, Charles Lepani and David Morawetz in their 1985 report The economy of Papua New Guinea compared minimum wages in PNG with a subset of the countries above back in 1978. Then, the PNG minimum wage was about twice as big or more than the other comparators. Today (using market exchange rates, and the earlier authors do), PNG comes in the middle of the pack, as Figure 2 shows. So far, we have shown that around the time of independence minimum wages were very high in PNG by international standards, and that they no longer are. Figure 3 shows how this change came about – also, for interest, comparing trends in PNG with those in Australia. Both the PNG and Australian weekly minimum wages are shown in Figure 3 measured in Australian dollars. The PNG minimum wage is converted into Australian dollars using the current exchange rate. Both wages are then adjusted for inflation and expressed in 2021 prices. The two series follow diametrically opposed paths. The Australian minimum wage fell with the high inflation of the 1970s and industrial relations reforms of the 1980s, and by the early 1990s was little more than half its value in the 1970s. It then increased in the late 1990s and 2000s during the resource boom, and has continued to increase. Adjusting for inflation, it is now almost back to where it was in the early 1970s. The PNG minimum wage does the opposite. It increased in the 1970s and was then held stable due to indexation, until the big bang reforms of 1992. Adjusted for inflation, PNG’s minimum wage continued to fall until 2004. There have since been some significant increases, but today PNG’s minimum wage is only about one-third of its value at independence, and below its value even in 1972, which is when the steep minimum wage increases began. The Australian minimum wage has always been significantly higher than the PNG one, but the ratio has changed a lot over time. The lowest that ratio has ever been is 2.2 in 1986, the highest 45 in 2004. The gap between the two wages is much higher now than at independence: the ratio of the Australian to the PNG minimum wage was 14.5 in 2021, compared to only 3.2 at independence (1975). This reflects PNG’s 1992 deregulation, and the faster growth in the Australian economy, which has enabled an increase in the Australian minimum wage. The solution to low wages in PNG is not necessarily to increase the minimum. In some sectors, where there is a lot of international competition, a higher minimum wage might lead to job losses. For example, in tuna processing, one of PNG’s main competitors is the Philippines. From Figure 1, we can see that PNG’s minimum wage is lower than the Philippines' on the basis of PPPs, but actually higher on the basis of market exchange rates. While the former is what matters for the welfare of workers, the latter is what matters for international competitiveness. Whether PNG’s minimum wage should be increased will require a lot more analysis. The point of this blog is simply that PNG’s minimum wage does not look high any more by international comparisons, as it has fallen a lot since independence. PNG is often described as a high-cost economy, and this is a fair description. However, with regards to unskilled labour, it is no longer a high-wage economy. Data note: The PNG Economic Database provides the weekly minimum wage of PNG going back to 1972, and the PGK-AUD exchange rate. Wikipedia provides the Australian weekly minimum wage data (hourly and weekly, on the assumption of a 38-hour week) starting from 1966. The Australian CPI is from the Australian aid tracker. There are some years where Australian minimum wage rates change more than once in a year. For such cases, we took the average as annual minimum wage rate. The data for Asia-Pacific comparisons are from the International Labour Organization and the World Bank. The different frequencies of minimum wages for each country in 2019 in the ILO’s report are adjusted to convert to weekly rates. World Bank data is used to obtain market exchange rates and PPP conversion factors. For the Goodman, et al., data go to Table 3.6 on p.61 in their report.\ Disclosure: This research was undertaken with the support of the ANU-UPNG Partnership, an initiative of the PNG-Australia Partnership, funded by the Department of Foreign Affairs and Trade. The views are those of the authors only. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is Director of the Development Policy Centre and Professor of Economics at the Crawford School of Public Policy, at The Australian National University. Kingtau Mambon is currently undertaking a Master of International and Development Economics at the ANU Crawford School of Public Policy, for which he was awarded a scholarship through the ANU-UPNG Partnership. Kelly Samof is a lecturer in economics at the School of Business and Public Policy, University of Papua New Guinea.