Barker wants more transparency in govt involvement in extractive sector

THE accuracy of economic forecasts are undermined due to a lack of transparency surrounding State involvement in the extractive sector, says Institute of National Affairs executive-director Paul Barker.
Barker, pictured, told The National that this was caused by a change from how Government used to regulate past resource projects.
“The general principle of a sound fiscal regime for resource project investment entails a mix of tax on profits, combined with some royalties or ‘production-sharing’ arrangements,” Barker said.
“These enable the State, which owns the resource, including provincial authorities and the identified landowners or project affected communities, to receive some revenue up front.”
“This is associated with production, even ahead of profits being earned, but not on an unduly onerous basis that would impose an excessive investment disincentive.”
Barker said unfortunately, unlike earlier resource projects, PNG’s more recent generation of resource projects had included generous tax and related concessions and incentives, as well as major direct public investment in the resource projects themselves. “These have tended to defer the receipt of revenue and deflected public expenditure, as well as enabling foreign exchange to be retained offshore, rather than being promptly remitted back to the source country of the exports.
“Clearly, the apparent lack of transparency in the process, and its agreements, has tended to add to the uncertainty. This has undermined the capacity, even of PNG’s fiscal and other financial institutions, to forecast and and to provide the needed assurance and actual revenue and foreign exchange required by the wider market to stimulate the market, economic activity and broader-based investment.”