Foreign Direct Investments Key To Economic Recovery
At a time when major resource projects in the country have faced somewhat uncertainties on the back of some positivity announced of late in the passing of amendments to cater for projects like Papua LNG, much isn’t really known of how much damage has already been done as a result of reviewing such agreements after they have been signed.
Damage in areas of lost revenue as per the lead time schedules ironed out over such agreements that are signed, investor confidence, and the cascading effect to the business community all planning on the back of such projects getting off the ground.
In its latest third quarter presentation yesterday, BSP Group CEO Robin Fleming summarised economic conditions in the last 6 months have been more difficult.
Adding the bank is certain that the difficulties will continue despite the positive announcements with Papua LNG, which hinges on another positive announcement on the agreement for the P’nyang project by this month.
“Even if those announcements are still made there is going to be some time before we are able to see that translate into additional foreign direct investment and foreign exchange flows coming through the market.
“So we would suggest the next 12 months conditions similar to the last 6 months relatively flat and some positive uptake as we get closer to that final investment decision for Papua LNG and P’nyang project towards the end of next of year.
“Hopefully some early works, if the partners in those particular projects have the confidence that those projects will proceed and equally you would anticipate that the government will be putting a lot of effort into endeavoring to get some agreement with the partners in the Wafi-Golpu project towards the middle of next year,” Mr Fleming said.
The recent September quarter report from Newcrest indicated the Wafi-Golpu project would scale down its operations in light of legal proceedings between the State and the provincial government of Morobe.
This also included Total’s reduction in activities earlier last month in what was described as a “right-sizing” exercise, where both staff numbers and logistics will be adjusted progressively in a phased approach, pending a condition precedent, as was described by Mr Fleming being 3rd Train of the PngLNG Expansion. “Certainly the government’s decision to ratify the Total gas agreement is positive from a business perspective, and not everyone is fully cognizant with the need for the P’nyang agreement also to be signed.
“The position from the partners is that they are very keen to reach an agreement with the PNG government, but that agreement has to be done by the end of the month,” Fleming said when asked about his confidence in delivery of the projects.
He pointed out also that the country cannot keep relying on financial institutions in borrowings as they always are debt related “Whereas foreign direct investments, investment in the country it’s additional foreign exchange and it isn’t debt related, and builds those of us to provide more domestic liquidity as Bank of PNG takes out any surplus dollars and puts kina back on the market.
“Any uncertainty affects any investor and to the degree that uncertainty extends to a period of time then that becomes more difficult for an investor to make a decision. “Once you sign the agreement the deal is done,” he added.
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