2019 business year in review

Business

WHAT a year it has been for the country’s private and business community! The business sector had its fair share of challenges caused by both domestic and external factors.
There were also events that happened throughout 2019 that brought to light issues that continue to affect the business environment and in turn, impacting on investor confidence in some way.
Some of the major events that were introduced this year include:

  • Inaugural Coconut Festival (Sep 26-28);
  • Agriculture Commodity Boards Retreat (Oct 29-30);
  • 2019 Papua New Guinea Mining and Petroleum Conference (Dec 3-5);
  • The Western and Central Pacific Fisheries Commission (WCPFC) (Dec 5-11); and,
  • Start-Up 2019 Convention hosted by Kumul Foundation Inc (Dec 8-11)

Significant up-coming projects and issues that also drew a lot of interest and discussion throughout the year were:

  • Concerns raised by businesses over lack of foreign currency in the country;
  • US$13billion (K43.5billion) Papua LNG project in Gulf to be operated by Total SA and partners;
  • Frieda River copper/gold project in West Sepik to be developed by PanAust Ltd; and,
  • Wafi-Golpu gold project in Morobe. A 50/50 joint venture project between Newcrest Mining Ltd and Harmony Gold Mining Company.

Meanwhile, the business and private sector was somewhat receptive to the political turn of events mid-this year.
Following are briefs of articles from the business sector from Jan-Dec 2019.

JANUARY

Hillary Turnamur

Jan 14: Hillary Turnamur from Toma in East New Britain became the first female in the country to be awarded certificate of competency as a mine manager.
Jan 18: Public servants who retired in the past two years were urged by Nambawan Super Ltd (NSL) to visit its branches to verify their details in order to receive their entitlements. Chairman Anthony Smare said this when confirming receipt of K100 million by NSL from the State for unfunded payments for former public servants. He said K100 million would go towards paying public servants who exited employment between June 2017 and April 2018.
Jan 18: Bank South Pacific’s 597 customers funded by its First Home Ownership Scheme (FHOS) loan programme.
Jan 21: Decision on the development of Frieda River project viewed as an important issue which required views from everyone, including operator, PanAust. East Sepik Governor Allan Bird made this known following talks on consultation for the proposed project which was likely to commence soon.

Prime Minister James Marape addressing the Start-Up 2019 Convention in Port Moresby.

FEBRUARY
Feb 18: Deputy Prime Minister and Treasurer Charles Abel (then) said Treasury would finalise the revised loan agreement for the Pacific Marine Industrial Zone (PMIZ) project in Madang. Abel said scope of the project was changed to turn it into an industrial zone rather than only fishing.

APRIL
April 11: Total SA, the operator of the US$13billion (K43.5billion) Papua LNG Project, ExxonMobil and Oil Search signed an agreement with the Government defining the fiscal framework of the project.
The agreement included:

  • A domestic market obligation which will provide gas for sustainable future domestic use;
  • A deferred payment mechanism for the State’s payment of past costs, easing the financial burden associated with the State’s acquisition of its equity interest in the project; and,
  • A national content to support local workforce development, involvement of local businesses and socio-economic development of the communities impacted by the project.

MAY
May 16: Oil Search Ltd celebrated 90 years of its operation in the country. Managing director Peter Botten said their success as a company, both in the past and into the future, was not just to invest in the economic development but also in social development of the country. Botten said the company started in 1929 and was supported by shareholders and joint venture partners such as Stanvac, BP and others to explore through to the late 1930s.

JUNE
June 18: Petroleum and Energy Minister Kerenga Kua said the Government had considered reviewing the agreements of the Papua LNG project signed in April. Kua clarified that it was not about revoking any agreements or understanding between the State and developer.
June 18: Mergers and acquisitions in businesses will be regulated more effectively as per the Independent Consumer and Competition Commission (Amendment) Act 2018 which came into effect on Nov 24, 2018. ICCC commissioner Paulus Ain said all business mergers and acquisitions would be subjected to the new mandatory notification regime, as opposed to the former voluntary notification regime which had allowed some businesses to undermine the State.

JULY
July 10: Tolukuma Gold Mine’s (TGML) liquidator Pini Accountants and Advisors offered for sale by public tender the mining lease 104 and other mine assets as a package. The liquidator in a public notice, stated that the sale was on a strictly ‘as is where is basis’. The firm said the sale comprised existing tenements, pending tenement applications and various assets including buildings, plant and equipment, machines and motor vehicles which were all situated at mine site in Central with a few assets located at Veimauri transit location outside Port Moresby.
July 10: Port Moresby Stock Exchange Ltd (POMSoX) was renamed to PNGX Markets Ltd. The name Port Moresby Stock Exchange Ltd – otherwise known as POMSoX – had served the company and the market since 1998. However, after 20 years, the board considered it was appropriate that the name of PNG’s national stock exchange better reflect the interests of the whole of Papua New Guinea.
July 30: Since 2017, Japan remained the largest purchaser ofnatural gas from Papua New Guinea, importing 4.2 million tonnes, followed by China (2.1 million tonnes), according to a World Bank report.

Internal Revenue Commission acting commissioner general Sam Koim (right), assistant commissioner Sam Loi (middle) and a guest going through the budget papers during the 2020 National Budget press lock-up.

July 30: The Bank of Papua New Guinea started implementing the last amendments to the Savings and Loans Society Act. BPNG governor Loi Bakani said it had taken a while for it to be gazetted and they were now in implementation. He said part of the implementation included the new requirement of companies employing 10 people to contribute to any super fund where the number had previously been 15 employees.
July 31: Global mineral exploration expenditure had risen sharply since 2016 while exploration expenditure in Papua New Guinea shrank to its lowest point in almost a decade as a result of investor concerns regarding the country’s fiscal and regulatory position. PNG Chamber of Mines and Petroleum executive director Albert Mellam said the declining trend in exploration activity was of significant concern, especially when global activity had been rising strongly.
July 31: The delay of the Pacific Marine Industrial Zone (PMIZ) project in Madang was a result of not having a business case in place, the Department of Commerce and Industry acting secretary Joseph Vutliu said. He said they met with a technical team from the China Exim Bank who were conducting their own assessment and valuing of the project and how they could assist with the loan of US$156 million (K517 million) that would get the project off the ground.

AUGUST
Aug 1: THE country’s foreign reserves stood at around US$1.9 billion (K6.3 billion), down from US$2.2 billion (K7.2 billion) last year, according to BPNG. Governor Loi Bakani said the decline was due to various interventions in the foreign exchange market as well as repayment of the sovereign bond interest.
Aug 5: The National Court ruled to allow the Porgera gold mine in Enga to continue operating while the application to extend its special mining lease was being considered.
Aug 24: Basamuk slurry spill incident in Madang.

SEPTEMBER
Sept 23: Investment Promotion Authority (IPA) and PNG Intellectual Property Office (PNGIPO) launched an online data base search engine to help clients search for registered trademarks, patents and industry designs online. IPA managing director Clarence Hoot said it not only provided results on intellectual property rights but also helped right holders and applicants monitor progress of their applications and status timely.
Sept 24: ANZ Bank completed sale of its retail, commercial and small-medium sized enterprise (SME) banking businesses in Papua New Guinea to Kina Bank on Sept 23. This allowed ANZ to focus solely on institutional and large corporate banking. The transfer to Kina Bank included 15 branches, 72 ATMs (automated teller machines) and more than 1,000 Eftpos machines, as well as ongoing roles for ANZ staff.
Sept 24: BPNG suspended the entire Comrade Trustee Services Ltd board members except for PNG Defence Force chief of staff Capt Philip Polewara. The bank said CTSL board had not performed in accordance with the central bank regulations and expectations resulting in the suspension. The bank appointed Sitiveni Weleilakeba as CTSL statutory manager effective as of July 29, 2019.
Sept 26: Foreign exchange reserves dropped by US$400 million (K1.3bil) in about six months from December 2018 according to the Asian Development Bank Outlook’s 2019 report. Foreign exchange reserves fell from a US$2.3.billion (K7.82b) in Dec 2018 to US$1.9 billion (K6.46bil) in May 2019 as the Bank of Papua New Guinea injected foreign currency into banks for distribution to private enterprises.

From left: Treasury secretary Dairi Vele, Planning and Monitoring Minister Sam Basil and Treasurer Ian Ling-Stuckey during 2020 Budget press lock-up.

OCTOBER
Oct 17: Petroleum and Energy Minister Kerenga Kua said the P’nyang gas field in Western will be developed together with train three as an integrated standalone gas project under the terms of a separate gas agreement.
Oct 29: The agriculture commodity boards retreat was hosted which brought together commodity boards, exporters and other interested individuals from the agriculture sector. Prime Minister James Marape stressed on the importance of Government’s intentions to invest more in agriculture. However, there remained challenges that the respective sectors in the agriculture space continued to face. One of which was transportation of produce from remote and rural areas to main towns where they were able to market or sell their produce. Pricing of commodities like coffee was also a major concern as well for local coffee farmers. Accessibility to markets outside of the country is something that needed to be addressed in order for farmers to get the right price for their produce. The event also provided opportunity for heads of commodity boards to discuss their past performances.

NOVEMBER
Nov 12: Eight PNG DataCo cable landing stations underwent construction and were projected to be completed by end of this year. Townships where the landing stations were being constructed were: Kokopo, Kerema, Daru, Vanimo, Wewak, Kavieng, Lorengau and Arawa. Port Moresby, Alotau, Popondetta and Madang cable landing stations are completed. According to PNG DataCo, the stations were part of the modern National Transmission Network being built by the Government’s representative and PNG DataCo Ltd. The landing station when completed would house the KSCN network reaching each provincial capital and branch out to users through retail providers.
Nov 28: A total of K2 billion in compensation and relocation benefits were expected to be paid directly to the landowners of the Lihir Gold mine by Newcrest Lihir Gold Mining Ltd (LGL) over the next 20 years.
Nov 29: The Government, a week prior, paid K12 million to PNG Power for the outstanding that it owed Puma Energy for fuel supply. PPL board chairman Peter Nupiri said that the load shedding exercise that was conducted a month before to date has been stopped for the whole festive period.
Nov 29: THE Government presented a record budget of K18.7 billion for 2020. The budget provided an opportunity for the new Government to reset expectations, and make decisions that may be harder to undertake later in the electoral cycle. The 2020 Budget introduced a number of new revenue measures with particular emphasis on increasing excise to enable the Government to meet its spending commitments while more closely addressing its policy priorities.
Policy Changes in the 2020 National Budget, mostly in the area of tax
Taxation amendments and revenue policies for implementation in 2020 financial year included:

  • Increased alcohol and cigarette excise by 10 per cent and restarting of these goods to consumer price index (CPI) for an incremental increase every six months from Dec 1, 2019;
  • Accelerated tax increases on alcohol beverages with exceedingly high alcohol concentration;
  • Increased progressive tax duty rates on unprocessed logs; and,
  • Enhanced land lease rental payments.

More policy announcements expected to be made next year include:

  • Reviewing of bank licencing fees and implementing an additional profit tax, as well as examining increases targeting foreign exchange spreads;
  • Review telecommunication licences and universal access levy regime;
  • Amendments to revise in Income Tax Act;
  • Introduce SME taxation regime based on turnover threshold;
  • Tariffs on imports of refined petroleum products; and,
  • Confirmation of a capital gains tax at a probable rate of 15 per cent with details yet to be agreed.

As per critiques, heavy excise taxes on alcohol and cigarettes would have a dampening effect on consumption of those products in current economic environment and might lead to lower revenues collection from those sectors.

DECEMBER
Dec 3-5: December began with the 2019 Mining and Petroleum Conference & Exhibition. The annual event was held in Port Moresby. Prime Minister James Marape had one clear message for the investors and prospective investors – not to exclude landowners in their investments and spin-offs.
The Prime Minister also appealed to the resource industry to partner and work with the Government to review the country’s resource laws. The resource sector welcomed Prime Minister Marape’s invitation to participate in the review.
The resource industry also stressed on the importance of making the industry conducive for investors to work comfortably and with ease.
Dec 8-11: With the emphasis on growing the country’s small to medium enterprise (SME) sector, Kumul Foundation Inc hosted the Start-Up 2019 Convention in Port Moresby to give more exposure to local SMEs. The event was attended by SMEs and well supported by large corporate entities. It also drew attention and participation from members of parliament. Internal Revenue Commission acting commissioner general Sam Koim highlighted some important tax matters for the SMEs.An important aspect he touched on was that the country’s tax regime was not conducive for SMEs to grow.