Finance

Finance

PNG Business News - August 01, 2022

Ling-Stuckey: Healthy Financial Sector Vital for Development

Papua New Guinea’s financial sector accounts for K2.3 billion of its economy in 2022, Treasurer Ian Ling-Stuckey says. Ling-Stuckey said a healthy and modern financial sector was vital for development. “This is a larger contribution than the size of the manufacturing sector (K1.705 billion), or even our transport and storage systems (K2.05 billion),” he said. “We must ensure that this part of our economy works efficiently. “It needs to serve the broader public interest as it helps mobilise savings into productive investment and support for SMEs (small to medium enterprises).” The Independent Advisory Group (IAG) is conducting a review, and the second phase has begun, according to the newly re-elected Kavieng MP. According to Ling-Stuckey, the first phase's success prompted changes to the Central Banking Act, which were overwhelmingly approved by Parliament in December. Robert Igara, chancellor of the University of Papua New Guinea, Sir Wilson Kamit, a former governor of the central bank, and Prof. Stephen Howes of the Australian National University are leading the independent inquiry. “International comparisons suggest there is much that can be done to improve our financial sector,” Ling-Stuckey said. “We have some of the greatest differences in the world between interest deposit rates paid to savers and interest costs charged to borrowers. “Fortunately, there are signs that this gap is narrowing as the Marape Government has been clear that changes are required. “The interest rate gap decreased from 8.51 per cent in 2018 down to 6.51 per cent in 2020, the best performance since 1998.” Ling-Stuckey said PNG’s financial sector lacked adequate competition which led to monopoly-style profit levels. “There is a serious problem of excess liquidity in which savings are not turned into investments,” he said. “There is a need to examine the use of technology and how it can improve access to finance and insurance for many more of our people. “We also need to address inefficiencies in our payments system which see too many people not being able to deposit funds and too many cheques bouncing due to unnecessary and bureaucratic impositions from our financial sector.” Public responses are being requested by IAG and are due on August 26. Ling-Stuckey stated that the Terms of Reference had incorporated the significance of a thorough public engagement process and urged organisations and others to participate. their opinions on how The financial system in PNG may be strengthened. “This is an example of the major structural reforms underway by the Government to modernise the PNG economy and lift our economic growth rate.”   Reference: The National (27 July 2022). “Healthy financial sector key: MP”.

Finance

PNG Business News - June 22, 2022

PNGX Markets and XBourse Australia sign MOU for use of blockchain technology to accelerate Pacific Islands’ capital markets

Photo credit: PNGX PNGX Markets - Papua New Guinea’s national stock exchange, XBourse Australia - a leading technology services company specialising in building innovative bespoke solutions for financial markets, and Pacific Capital Markets Development - an Australian company committed to the development of capital markets in the Pacific region, have recently signed a memorandum of understanding to explore the development of worldleading digital solutions for Pacific Islands’ capital markets, starting in Papua New Guinea. The objectives of the cooperative arrangements are to enhance capital market efficiency, promote market liquidity, attract investment and reduce market risk in the Pacific Islands region. Under the memorandum, PNGX, XBourse and PCMD will work together to explore the phased development of state-of-the-art digital market infrastructure and services:  Multi-currency post-trade settlement and registration solutions for public and private markets; including equities, bonds and climate instruments.  central securities depositories and registries;  custodial services for international investors;  integrated commercial and regulatory solutions for SMEs; and  superannuation registry solutions. “We are very excited to be working with XBourse” said PNGX Chairman and PCMD Director, Mr David Lawrence. “XBourse’s digital ledger technology (also known as blockchain) and smart contracts have the potential to turbo-charge the public and private capital markets in the Pacific region. The concepts currently being developed would be world-leading, presenting real opportunities for Papua New Guinea. “We have a vision to provide an integrated solution for Pacific companies of all sizes offering faster access to debt and equity capital, instantaneous and risk-free settlement of trades, a central securities depository to make trading easier for all market users, a custodial platform to meet the needs of international investors, and the potential for expansion into other services, such as superannuation technology services” Mr Lawrence said. “XBourse is a market leader in the financial technology sector and has been working in recent years with globally recognised technology partners to develop a range of integrated and innovative market platforms and digital solutions that can be readily deployed into all types of markets, covering both existing and new assets, such as climate, that are rapidly being digitised. These platforms deliver greater functionality, efficiency and a new way of doing business in the 21st century at a lower cost than existing incumbent legacy systems and processes. “Importantly they offer opportunities for new asset classes in the digital age. Some of the opportunities include issuance and registration of assets, trading, digital registries and other back-office systems with immutable records of ownership, transactions and provenance that provide much-needed integrity and security to support the market and regulatory confidence. “XBourse is excited to be working with PNGX and Pacific Markets Capital Development to identify ways XBourse’s technology solutions can be implemented in the PNG market. Our experience has shown that better market infrastructure is vital to promote efficient use and allocation of capital and to attract the interest of investors large and small,” said XBourse CEO and Founder, Mr Tony Mackay. “Digitisation and blockchain provide the opportunity for markets of all types and sizes to better and more efficiently access capital. Just as importantly, the new market infrastructure can reduce operational and regulatory risk for all participants and operators. “XBourse is also working on early-stage projects to tokenise carbon abatement and carbon credits, and we see enormous potential in the Pacific for these instruments where digitisation and blockchain technology can validate, regulate and tokenise these instruments and initiatives and make markets in them,” Tony Mackay said. “The input of key stakeholders in the market, such as listed companies, banks, superannuation funds and stockbrokers, is critical to the success of this project and ultimately of the PNG market” said PNGX General Manager, Ms Elizabeth Wamsa. “We will shortly be conducting industry forums to discuss user and regulator needs to enable the development of an optimal solution” she said.   Article courtesy of PNGX

Finance

PNG Business News - May 17, 2022

Partnership Between IFC and PNGX to Deepen Papua New Guinea’s Capital Market, Help Accelerate Economic Growth

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

Finance

PNG Business News - May 02, 2022

BSP Insights: PNG FX Liquidity expected to continue growing into the half-year

Quarter one of 2022 Foreign Exchange (FX) market inflow momentum is expected to continue into the half-year, assisted by firmer commodity prices, end of half-year dividend flows and foreign aid, according to BSP Group General Manager – Treasury, Rohan George. “As FX inflows can be lumpy, we expect there to be periods where outstanding FX orders build up. “To manage volatility in foreign currency flows, businesses should place FX orders (with correct documentation), as soon as possible, ensure orders are cash-backed whilst awaiting execution, ensuring tax clearance certificates are current and reflect the expected FX order execution time,” Mr. George stated in the BSP Pacific Economic and Market Insight Q1 2022 Report. He emphasised in the report that in the first quarter of 2022, FX  market turnover fell 2% from the strong December Quarter 2021, but rose 24% from March Quarter 2021 (12 months ago), supported by strong commodity prices, in particular Oil, Copper, Palm Oil, Coffee. “Firmer commodity prices offset the lost FX market inflows from the closure of the Porgera Gold Mine (Barrick FX inflows down 75%), whilst the stronger commodity prices added to transportation and input costs of imported goods increased the volume of new FX orders placed post-Christmas,” Mr George added. Meanwhile, the outstanding FX orders expectation of reopening the Porgera Gold Mine is also positive from foreign exchange perspective remained similar to levels seen 12 months ago. “BPNG FX intervention rose 8% in 2022, reducing some of the outstanding FX order backlogs, but remains unchanged from March Quarter 2021. “The Kina fell 10 basis points against the U.S. dollar to 0.2840 in 2022, the first movement for over 14 months. Stronger commodity prices, due to the invasion of Ukraine, strengthened the Australian dollar and saw the Kina fall to 0.36,” Mr. George further added.

Finance

PNG Business News - April 28, 2022

PNGX joins the UN Sustainable Stock Exchange Initiative

PNGX announces that the United Nations Sustainable Stock Exchange initiative has welcomed PNGX Markets, the Papua New Guinea National Stock Exchange, as a new member. PNGX has solidified its commitment to transparency and sustainability by becoming a partner exchange of the UN SSE initiative. The newest partner joins a network of now 114 stock exchanges around the world that are committed to promoting sustainable development. The SSE works with stock exchanges through technical assistance, consensus building, and research to contribute to the achievement of the United Nations Sustainable Development Goals (SDGs) and to stimulate investment for a sustainable future. Exchanges around the world partner with the SSE to work towards a common objective of fostering financial markets that support the growth of sustainable and responsible business practices. “Partnering with the SSE initiative compliments the goals PNGX is striving towards to help develop the Papua New Guinea capital markets and support the sustainability of the PNG economy” said Mr David Lawrence, PNGX Chairman. The Exchange recognizes the number of sustainability challenges that an emerging economy like Papua New Guinea face, which include access to capital for SMEs, corporate governance and transparency, climate change, gender equality, and environmental sustainability. Addressing sustainability factors is of increasing importance to obtaining access to finance in today’s world and PNGX is committed to it. “As part of a network of like-minded exchanges, PNGX can draw upon the resources of the SSE and its members and partners to develop locally relevant guidance and standards to support the development and sustainability of the local economy. While sustainability-based finance is not yet well developed in Papua New Guinea, joining SSE will have direct relevance by assisting PNGX to give companies the tools they will need to access future finance” Mr Lawrence said.   Article courtesy of PNGX

Finance

PNG Business News - April 27, 2022

BSP: “Additional Company Tax” will deter further Foreign Direct Investment

The new Additional Company Tax introduced following the March 2022 sitting of Parliament, will ultimately increase uncertainty and reduce investor confidence in PNG, says BSP Group CEO Robin Fleming. “Consequently, the Tax may well result in a further reduction in Foreign Direct Investment (FDI) at a time when PNG needs increased FDI,” Mr. Fleming said. According to the BSP Pacific Economic and Market Insight Q1 2022 Report, Mr. Fleming said clearly the new tax will have a direct negative impact on BSP shareholders with the tax taken up in BSP’s first quarter results for 2022. The Report stated that BSP is also hearing concerns from the broader corporate sector about the seemingly arbitrary nature of the tax. “This has resulted in a high degree of business uncertainty that may well reduce their appetite to make decisions on investments and capital expenditure as the tax sends a message to businesses not to invest and strive to be successful,” Mr. Fleming said. Mr. Fleming stated in the report that the new tax will also reduce the attractiveness of PNG’s banking industry, making it less likely that offshore banks will enter the PNG market. This will further reduce competition at a time when ANZ recently exited PNG’s retail market, with the sale of its retail businesses to Kina Bank. “The recent amendments to the Income Tax (Amendment) Act 2022 introduced significant change, with the Additional Companies Tax, based on a company’s market concertation and the one-time tax liability on Digicel of K350 million, appear arbitrary and will adversely impact future business investment decisions, Mr. Fleming added. “When confidence is up, customers are buying, sales are higher, jobs are created, inventory investments are made, capital expenditure increases, and business owners feel assurance that the future for their business looks bright, which then boosts economic growth,” said Mr. Fleming.   Article courtesy of BSP

Finance

PNG Business News - April 25, 2022

Govt Reaches Revenue Targets, Says Treasurer

Treasurer Ian Ling-Stuckey claims that budget repair enabled the government to reach its income and finance objectives while also keeping spending under control in last year's budget. In presenting the Final Budget Outcome (FBO) for 2021, Ling-Stuckey said that the budget deficit was preserved at K6.3 billion, down from the K6.6 billion predicted and that spending was increased by K20 billion owing to more outstanding donor funds. Higher tax collections and donor funds provided K13.9 billion in income. “As a share of our GDP (gross domestic product), the deficit drops from 8.9 per cent of GDP in 2020 down to 6.7 per cent in 2021. A reduction of over K1bil from the K7bil in 2020,” Ling-Stuckey said. “By international standards, this is an extraordinary turnaround in just one year – an improvement of 2.2 percentage points of GDP, more than double what would be regarded internationally as a reasonable rate of repair. “Budget repair and reconstruction build international credibility.” The government got K4.9 billion in solid, low-cost overseas funding, according to the Treasurer. “Our constructive, open and transparent international engagements also led to a major increase in international grant support. “We budgeted for K1bil in international grant support in 2021 and received K2.1bil, more than double. An extra K1 billion in grant support.”.   Reference: The National (22 April 2022). “Govt met revenue targets: Treasurer”. 

Finance

PNG Business News - March 28, 2022

PM Marape announces record K10 billion in foreign exchange

Photo: PM Marape announcing the good news in Parliament recently. Picture courtesy of PARLIAMENT MEDIA In the midst of the worldwide crisis caused by the Russia-Ukraine war, James Marape claims that the Bank of PNG has the largest amounts of foreign exchange ever, totaling more than K10 billion. This is in sharp contrast to the O'Neill era, when foreign exchange reserves were dangerously low and importers had to wait extended periods of time for US dollars. PM Marape announced the good news in Parliament, in response to a query from NCD Governor, Hon. Powes Parkop was asked if PNG had enough currency for petroleum importers, notably Puma Energy, which operates the Napanapa Refinery. “At this point in time, Bank of PNG has more foreign reserves than it has every had, more so for the last 10 years,” he said. “Today, we have got K10 billion-plus, or about US$3 billion  sitting in our foreign reserves. “This means that important customers like Puma, and others who need forex, should have easy access now to US dollars for their purchases.” If Puma is having trouble accessing foreign funds to bring in gasoline, PM Marape says they should meet Treasurer Hon. To help, Ian Ling-Stuckey or himself. “This is so that in these tough times, we don’t have queues (for forex), or shortage of fuel in our country,” he said. PM Marape responded to a query about whether Napanapa could get oil from Kutubu in the Southern Highlands by saying that Kutubu had set contracts but could also meet domestic market commitments. “As you know, Kutubu Crude has export contracts to it, but this is something that we are looking at going forward into the future,” he said. “That is why this Government has already been aggressive in the domestic market obligation side of gas, so that we move into the space of downstream. “Downstream processing is something that we have overlooked in our country for many, many years, but we are now moving to get more from our oil and gas so that we Move into downstream processing. “This is so that in the future we are not so dependent on imported items like fuel, we are not dependent on external market forces, where a price rise means rise in prices in our domestic economy.”   Reference: PM James Marape News Page (23 March 2022). “PM Marape announces record K10 billion in foreign exchange”.

Finance

PNG Business News - February 17, 2022

Bank of Papua New Guinea: Foreign Exchange Increases

Photo: Bank of Papua New Guinea According to a top official, the volume of foreign exchange in Papua New Guinea increased over a six-month period last year. Benny Popoitai, the acting governor of the Bank of Papua New Guinea, said this was mainly owing to the World Bank's budget assistance loan, liquefied natural gas (LNG) tax collections, and donor funding. Foreign exchange reserves were at US$2.49 billion (about K8.625 billion) on June 30 last year and had risen to US$2.6 billion (around K8.997 billion) on December 7. BPNG has maintained its accommodating monetary policy stance since the easing in March 2020, according to Popoitai, in order to assist economic recovery. The cash reserve requirement (CRR) and kina facility rate (KFR) remained unchanged at 3.0% and 7.00%, respectively. Except for the Japanese yen and the euro, he claimed the average daily kina exchange rate fell against all major currencies. He said the kina had declined by 0.2 per cent to US$0.2850, 4.4 per cent to £0.2150 against the British pound and 3.2 per cent to AU$0.3999 against the Australian dollar. The kina, on the other hand, rose by 4.7 per cent to 32.36 yen, while the euro rose by 0.3 per cent to €0.2524. The trade-weighted index (TWI) fell by 1.4 per cent to 27.46 over the same time period as a result of these currency moves. “The level of gross foreign exchange reserves at the end of June 2021 was K8.586 billion, sufficient for 8.6 months of total and 16.2 months of non-mineral import covers. “The Central Bank maintained a neutral monetary policy stance in the June quarter of 2021, keeping the KFR unchanged at three per cent. This was to encourage private sector activity and support the economic recovery. The repurchase agreement facility dealing margins were also maintained at 100 basis points on both sides of the KFR.” In order to regulate liquidity, he added, BPNG has used its open market operation tools in conducting monetary policy.   Reference: The National (15 February 2022). “FX jumped over 6 months in ’21”.

Finance

PNG Business News - January 27, 2022

FX Revenue Up By 10.5%, According to CEO

Photo credit:  According to Robin Fleming, chief executive officer of Bank South Pacific Financial Group Ltd (BSP), the country saw significant amounts of foreign exchange (FX) currency in December. Strong commodity prices, end-of-year dividend payouts, and donor cash for different initiatives, according to Fleming. He stated that foreign exchange receipts increased by 10.5%, or K965 million, from K9.21 billion in the September quarter to K10.175 billion in the December quarter of last year. “FX market turnover rose by 7.4 per cent from a year earlier,” Fleming told The National. “FX market turnover has risen by 9.8 per cent over the past six months, supported by strong commodity prices, in particular oil, copper, palm oil, coffee. “Firmer commodity prices, combined with increased project-specific, donor foreign currency inflows and end of year dividend payments offset the lost FX market inflows from the closure of the Porgera gold mine (Barrick FX inflows down 75 per cent),”Fleming said. “The kina has been stable and unchanged against the US dollar for the past 14 months, however the pullback in the Australian and US dollars amid the Coronavirus (Covid-19) related weakness in the Australian economy, strength in the US economy helped strengthen the kina against the Australian dollar. “The kina is likely to remain stable against the US dollar, while a steady Australian dollar will see improved stability in the kina to Australian dollar cross rate.” However, Fleming predicted that the significant FX inflows in December 2021 would drop in the March quarter of this year. “December FX inflows have substantially reduced outstanding FX orders from high levels seen in November, and this is expected to reverse in January, February with post-Christmas restocking.”   Reference: Luma, Dale. The National (26 January 2022). “FX revenue up by 10.5pc: CEO”.

Finance

PNG Business News - January 05, 2022

Treasurer Happy With Central Bank Modernisation

Treasurer Ian Ling-Stuckey is delighted with the work being done to put the modifications to the Central Banking Act into effect, which were voted unanimously by Parliament last December 2021. Treasurer Ling-Stuckey stated in a statement that following the NEC's decision on a new Acting Governor, Benny Popoitai, the former Head of Financial Analysis and Supervisory Unit and former Deputy Governor, will be sworn in as Acting Governor. This, according to Ling-Stuckey, is the beginning of the reform process to modernize BPNG by increasing governance, accountability, and independence. “The reforms are the result of a comprehensive consultation process involving key firms and institutions in PNG, other central banks in our region and the IMF. The nation must say thank you to the Independent Advisory Group that led these consultations and their 132-page report on reform options.   “The Government has carefully considered these recommendations and is now proposing specific reforms,” he said.  It was regrettable, according to Treasurer Ling-Stuckey, that the former Governor refused to engage with the review process, declining several requests for meetings and failing to designate any BPNG officials to the review Secretariat. “The former Governor wrote to the Prime Minister protesting the review. The time for his input was in the preparation of recommendations to the government from the IAG. He constantly declined to cooperate. It is disappointing that he is now claiming inadequate consultation with himself,” said Ling-Stuckey.  He added further, “The government considered the recommendations of the IAG review and inputs on the recommendations were provided by the IMF, Treasury and eventually even BPNG.   “These were considered by the government and built into the drafting instructions for the State Solicitor and the First Legislative Counsel. The changes received the unanimous support of the Parliament, including being praised by the Leader of the Opposition.”   Treasurer Link-Stuckey urged the outgoing Governor to embrace Parliament's unanimous decision and facilitate a smooth transition to a revamped BPNG.   Reference: Loop (2 January 2021). “Modernising PNG’s Central Bank”. 

Finance

PNG Business News - January 05, 2022

Tax collection hits record K8.1 billion in 2021

Photo: PM Marape launches the new online tax payment platform, MyIRC, with Commissioner-General Koim and managers of IRC Despite a hard economic climate brought on by COVID-19, the Marape Government's commitment in reinvigorating the Internal Revenue Commission (IRC) is paying off with a revenue collection of a record K8.1 billion in the year 2021. During Prime Minister Hon. David Cameron's tenure as Prime Minister, this became obvious. The following is the speech given by James Marape at the unveiling of the IRC's new online tax payment system, MyIRC Online Service Platform. This year is only the third time in the last decade that Government revenue collection has surpassed K8 billion; the first was in 2014, during the first year of PNGLNG production, and the second was in 2018, both of which were comparatively good economic years for PNG, according to the Prime Minister. Prime Minister Marape went on to say that IRC and Customs' determination and desire to accomplish their joint objective despite the Covid-affected economy demonstrates his government's focus on investing resources and providing assistance for tax collectors, which has resulted in a strong revenue return. The government has shown its continued support for IRC by allocating K35 million in the 2022 budget to the Integrated Tax Management system, as well as additional K11 million for goods and service tax administration. The new online tax payment method is anticipated to enhance the functioning of the IRC. The Prime Minister said he was “totally proud” of this “milestone” performance by the tax collectors, who have worked “exceptionally well”, and even above what Treasury had anticipated by K200 million in spite of the terrible period the country is presently undergoing. “We pledged to assist IRC and Customs to the best of our ability, and this is the highest IRC and Customs have received from the Budget to ensure you build up your capacity, ramp up efficiency, and get going,” said the Prime Minister. “I am not someone who lies when I make policy pronouncements; I live up to all my policy pronouncements like I did with the SME funding commitments, the commodity price support and others.” Prime Minister Marape said he was pleased to see the IRC and Customs departments move into the e-service area since this is the way he wants government services to go. This aims to reduce human involvement and manipulation of these vital fee and tax collecting systems. “By the time the country turns 50 years in 2025, all transactions at IRC and Customs should be done digitally,” said the Prime Minister. “As part of the support to these two government agencies, 500 allotments under the National Housing Corporation will be given out to government employees, including those of IRC and Customs as more incentive to work better for our country.”   Reference: PM James Marape News Page (20 December 2021). “Tax collection hits record K8.1 billion in 2021”. 

Finance

PNG Business News - November 26, 2021

PNGX: Trade Declined Last Year

Photo credit: PNGX The chairman of the PNG Stock Exchange (PNGX), David Lawrence, stated that total transaction figures on the PNGX decreased last year. The 12 listed firms had a combined market capitalization of K91.89 billion. PNG Air Ltd, he added, was still suspended for failing to present audited financial statements. Niuminco, a mining exploration firm, has also been put on hold. “We are seeing an increase in the number of trades on the market but the overall value and volume is down a bit on last year,” Lawrence said. Six of the 12 firms are listed on both the PNGX and the ASX (Australian Securities Exchange). Newcrest, Oil Search, Bank South Pacific Financial Group Ltd, Kina Securities, Coppermoly, and Steamships are among the companies involved. According to Lawrence, the influence of the Coronavirus (Covid-19) on the market and the status of the PNG economy varies depending on the industry. “Companies with activities in tourism and logistics have been impacted while others such as in NGP Agmark in agriculture have seen positive results. “The impact of Covid-19 will be negative on the market next year, especially if the vaccination rate remains at its very low levels. “The ongoing foreign exchange restrictions are also a negative for overseas investors looking at PNG listed companies.” The general election in 2022, according to Lawrence, will have an influence because markets are normally flat throughout the uncertain time leading up to an election. “Two positive signs for 2022 are an increase in the number of enquiries about listing during 2021 and an increase in enquiries from potential new small local investors,” he said. “We believe there are a small number of local companies currently working towards listing on PNGX in the next one to two years, which would be good for the market and will open up new opportunities for investors.” He stated that the PNGX is developing new goods and services.   Reference: Dale, Luma. The National (23 November 2021). “PNGX says trade declined in ’20”.

Finance

PNG Business News - November 18, 2021

Treasurer Welcomes Banking Review

The Independent Advisory Group's examination of the 2000 Central Banking Act was recently welcomed by Treasurer Ian Ling-Stuckey. On October 25, the first phase report was finished and posted on the Bank of PNG's website. Learning from experience, increasing Bank independence, delivering accountability, limiting discretion, and connecting objectives with functions are some of the themes highlighted in the paper. In a statement, Treasurer Ling-Stuckey said: “I support entirely the view expressed by the Chair of the IAG that the review presents an ‘opportunity to strengthen the Bank of Papua New Guinea. “This is very much in line with the terms of reference provided to the Review on 13 May where the Government sought to modernise this key economic institution of the country. “This is an excellent document. It is available on the web and I encourage those seriously interested in advancing our country’s economy to go through the detailed, thorough, objective analysis in the report’s 132 pages. “I thank the members of the IAG; the Chair Robert Igara, as well as Sir Wilson Kamit and Professor Stephen Howes for the long hours they have put into producing such a fine report. “The report has 31 recommendations from its first phase. “It also sets out important issues for review in the second phase of the IAG’s work focused on the regulation of the financial, superannuation and insurance sectors, the application of Anti-Money Laundering and Counter-Terrorism Financing rules, BPNG’s financial management and performance, the shortage of cash in 2021, and improved data communication.   “I agree strongly with the view by the IAG that reforms are now needed, and could have the same transformational impact as the initial reforms 20 years ago. “In going through the report, the immediate focus will be on governance reforms. PNG has been left behind by almost all other countries. We are one of only four countries in the world that focuses all power over monetary policy in one person – we need a more collegiate approach. “We need to correct demonstrated areas of under-performance. This will include moves to strengthen the Central Bank Board. “I will be looking at introducing the highest priority reforms during the coming sitting of Parliament, with further reforms following the second phase of the report,” stated the Treasurer. The Treasurer also thanked Secretariat members for their support of the review, which included the IMF's comprehensive remarks. “I thank all the financial institutions and business organisations that have also participated in the review.”   Reference: Loop (15 November 2021). “Treasurer welcomes banking act review”. 

Finance

PNG Business News - November 08, 2021

BPNG Explains the Importance of Forex

The supply and demand for foreign money dictate how the foreign exchange market operates. Governor Loi Bakani stated in the Central Bank's Monetary Policy Statement that PNG's foreign exchange supply is mostly derived from export receipts, government external loans, grants, and foreign direct investments. Foreign exchange is needed primarily for the import of goods and services, the payment of external debt, dividend and income repatriation, and other transfers. Physical products other than non-goods (service, dividends, transfers, and capital related-flows) normally have a payment time of up to two months before final remittances. Because the foreign exchange orders are inside this window, they should not be confused with outstanding orders. Bakani explained that following the kina's flotation in 1994, the currency fell against the USD and AUD until 2003, after which it remained relatively steady. “The country did not take advantage of this opportunity to develop a robust non-mineral sector where the bulk of the population is engaged in, for employment, exports and revenue generation.  “The Government’s focus then, however, was mainly on the enclave extractive sector.  With the special concessions allowed under the various PDAs, export proceeds of mineral companies are kept in their foreign currency accounts (FCAs) abroad.”  As a result, he noted, the economy did not reap the full benefits of persistent foreign cash inflows. With the establishment of the PNG LNG Project in 2012, a substantial structural shift occurred. “This contributed to the huge current account surpluses, but without corresponding flows into the foreign exchange market. This has undermined the proper functioning of the foreign exchange market and its exchange rate setting role.  “Given the development in the FX market and the exchange rate, a number of external researchers have suggested that the kina is overvalued and not convertible.”  To achieve external balance and support non-mineral private sector activity, a significant depreciation in the exchange rate is required, particularly for exports and import substitution. However, a large depreciation may not necessarily result in the desired supply response in the non-mineral private sector due to structural impediments, according to the Central Bank's own internal assessment. “It also shows that activity in the non-mineral private sector is driven by international commodity prices, domestic prices and Government spending relative to the impact of kina depreciation.  “Since the floating, the kina has depreciated by around 73.0 percent in nominal terms, while the impact on the supply response on agriculture production has been minimal.  “The large depreciation would also have a minimal impact on inflows by the mineral sector, and portfolio inflows.”  Bakani also pointed out that because PNG is an import-dependent economy, a significant devaluation would raise import costs and local inflation, negatively impacting people's well-being. “For instance, a proposed 20.0 percent depreciation of the nominal exchange rate would lead to an increase in inflation of around 8.0 – 10.0 percent, and a further 13.0 percent depreciation will lead to inflation increasing further by around 6.0 – 8.0 percent.  “This would give a 14.0 – 18.0 percent increase over a three-year period. If other determinants of inflation are taken into consideration, inflation would be much higher.” Furthermore, Bakani emphasized that exchange rate movement is a reflection of the economy's current structural problems and should not be viewed as a solution to the external imbalance. While the Bank has made steps to strengthen the foreign exchange market's functioning, the Government must also adopt coordinated policy measures to expand and diversify the export base and stimulate import replacements.   Reference: Loop (4 November 2021). “BPNG Explains Importance Of Forex”.

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