Bigger spotlight to fall on PNG budget
Wednesday, 14 November 2012
THE forthcoming budget, delayed until November 20 to allow for the visit by Prince Charles, will be closely scrutinised for clues as to where the O’Neill-Dion Government may be heading. By Wantok
The recent sudden decision to declare Professor Ross Garnaut an unwelcome visitor came as something of a shock to many PNG observers. After all, Garnaut’s involvement with PNG pre-dates independence in 1975.
Until the recent merger between Newcrest and Lihir Gold, he was chairman of Lihir Gold. Although he stepped down recently as chairman of PNG Sustainable Development Program Ltd, he remains chairman of Ok Tedi Ltd, the single largest contributor to the government’s tax coffers in recent years.
On the surface, it seems the only thing Garnaut did wrong was to state that the country’s political leaders had a tendency to use new-found wealth for immediate purposes rather than long-term development, a point more true of PNG than most developing countries.
So it is clear the problem that led Prime Minister Peter O’Neill to declare Garnaut unwelcome in PNG until BHP Billiton surrenders control of PNGSDP to his government and people does not make sense.
Radio Australia made this point by contrasting the treatment of Garnaut with the PNG government’s decision to grant citizenship to an Indonesian refugee from justice, an individual facing corruption charges in his native country.
Other signals from the government will continue to cause foreign observers to be wary of future developments.
One of the interesting signals from the forthcoming budget will be whether O’Neill and his treasurer, Don Poyle, are seeing eye-to-eye in terms of budget strategy and planning. Then again, Finance Minister James Marape has been sending out his own signals.
O’Neill seems to be a man in a hurry, a little like his early-1990s predecessor, who wanted to push the pace of development on the basis of a perceived resources boom. Instead, it brought on an era that saw the collapse of the kina and intervention from the World Bank and International Monetary Fund.
One of the most sobering pieces of news for O’Neill to contend with is the big cost blowout for the PNG LNG Project, now estimated at US$19 billion rather than US$15.7 billion. The increase could well reduce the early dividends for government equity and impact on corporate tax revenues.
For the wider world, it indicates PNG remains a difficult place to do business, despite being well endowed with the immense wealth of its resource base.
For the PNG government, which has signalled plans to raise a K6 billion loan from China, it means it must now look for up to US$1 billion more to pay for its share of those additional costs.
Another interesting recent development came from left field, an invitation from Petroleum Minister William Duma to the president of the Autonomous Bougainville Government, John Momis, to enter negotiations over the Bougainville Copper Mine.
Momis declined, insisting that resolution of mine issues was a matter for his provincial government and not of concern to the national government.
Why Duma was entering the trouble-prone Bougainville arena on a matter totally outside his portfolio still remains a mystery.
These are trying times for junior mining companies in PNG, with Barrick wanting to opt out of its farm-out deal with Coppermoly, and Xstrata looking to possibly sell all or part of its equity in the world-class Frieda River copper-gold deposit.
Nautilus Minerals found itself in an unexpected squabble with the government after it obtained all environmental and mining approvals to proceed with its deep-sea mining venture at Solwara 1.
Even though there was no ministerial or National Executive Council approval, bureaucrats decided to force Nautilus into arbitration over issues that are yet to have any clarity.
The miners and their supporters will not see many direct signals in the budget unless they are negative.
Nevertheless, actions in other arenas and general plans will be closely scrutinised to determine whether the opaque nature of government processes is going to make it more difficult for investors.
Eyebrows were raised just prior to Prince Charles’ visit when Port Moresby road works were carried out at lightning pace, in contrast to usual delays for maintenance jobs. It seems hundreds of millions of kina may be made available for similar purposes in the capital city in the coming year.
