Benefits funding system proposal

 THE National Research Institute (NRI) has proposed for a two-fund benefits management system for Papua New Guinea’s resources sector.

In a case study that NRI conducted on the Porgera gold (Enga) and Hidden Valley mine (Morobe) projects, the institute recommended that a simplified system consisting of a financial and development pool would provide a more transparent and efficient  distribution of the benefits to landowners and communities being affected by extractive industry.

“Both case studies demonstrated that the current mechanisms for sharing and managing the benefits flows from the mining activities are weak,” NRI said.

“Institutional weakness in the Companies Act which is undermining efficient management of landowner companies has been highlighted.

“A two funds benefits stream management pool is proposed – financial and development – with well-defined institutional structures that ensures efficient management of the benefits flow.”

According to the report, the financial benefits pool (royalties, business spin-offs and mine benefits) would be divided into three funds;

• Long-term (40 per cent) – addressing intergenerational issues;
• human capital formation (40 percent) – fund for health, education and housing schemes for beneficiaries; and,
• Cash (20 per cent) – paid as cash or in shopping vouchers.

The development benefits pool would include all special support grants, tax credit schemes, and donor funded projects would be used for development through a special purpose vehicle (SPV) consisting of the state, the project developer, a community representative and an independent development financier.

NRI said the SPV would be tasked to procure and oversee the development of the requisite infrastructure, which will permanently transform the mining affected communities.