Fly-in, fly-out slammed

Business, Normal

The National, Thursday 20th of February, 2014

THE fly-in, fly-out (FIFO) scheme by the extractive industry has been draining the country of its economic, social and infrastructure development benefits, according to the Resource Owners Federation of Papua New Guinea.
The federation said this in a statement as they praised Mining Minister Byron Chan for revealing the government’s intention in Parliament last week to abolish the FIFO practice.
The federation said that in 1997, a study conducted by National Research Institute (NRI) on the Economic Impact of the FIFO operations of one mining project in PNG said in part:
n The direct loss as a result of the FIFO system was the personal consumption transferred from the local economy to overseas organisations.
This part mainly consisted of that portion of wages and salaries, which would have been consumed locally, but had now been transferred elsewhere;
n Using the national income accounting equation, it was estimated that, on an average, the annual loss of national income was between about K5.2 million and K13 million. Considering the multiplier effect, (2.2), the annual loss must be about K11 million and K29 million;
n Continuation of the FIFO system for a decade would cost the economy, including the multiplier effect, between K110 million and K300 million.
n The indirect impact on employment lost in the informal sector in PNG, more particularly in the local area, must be about 0.1%, that was about 300 jobs in the informal sector.
The report found that it was economically viable to build a township to accommodate the FIFO workers from this particular mine instead of carrying out the system.
However, the national government had not taken any positive action to stop this practice since the NRI findings in 1997.
 At that time, using the report’s formula, the country must have now lost between K253 million and K690 million over the period of the life of this particular project though the FIFO system of operating the mine.
The number would clearly run into many billions if all projects that practice the FIFO in the country were taken into account.
The federation has urged the government to immediately legislate against the FIFO operations throughout the country, claiming the impact of such legislation would be significant for PNG.