Global miners face growing nationalism

Business, Normal

The Nationl, Monday 10th September, 2012

THE growing global threat of resource nationalism has been rated as the No 1 threat for miners and Papua New Guinea is no exception, according to lawyer Hubert Namani.He told an industry gathering organised by the Mineral Resources Authority last Friday that Ernest & Young, in a recent report Business Risks Facing Mining and Metals 2012-2013, said “resource nationalism retains the No 1 risk ranking with many governments around the world”.Australia recently increased its mineral resources rent tax, and Zimbabwe was now very tough on foreign miners by taking more than 51% of operations while still demanding a greater share.PNG has a different scheme where North Fly MP and a current minister Boka Kondra had proposed an amendment to the Mining Act relating to resource ownership.
Lawyer Peter Donigi, the architect of this bill for Kondra, gives five reasons why the PNG government can be accused of “maintaining the veil that shrouds PNG by:
n    Maintaining the pre-independence system of resting all minerals, oil and gas under any land in PNG in the state;n    Not declaring its support for the UN Declaration on the Rights of Indigenous People;
n    Defining land as not including all that is below the surface of the land;
n    Termination of customary law application to customary land registered under the Land Registration (Amendment) Act 2009 and through the mechanism of Land Groups Incorporation (Amendment) Act 2009; and
n    Prohibiting customary land rights holders from dealing with their land except through the state.
Donigi argues production sharing agreements – under which the state as the owner of mineral resources engages a foreign company to provide technical and financial services for exploration and development – should be with landowners and investors.
“The rationale he (Donigi) puts is that the resource belongs to the people and, therefore, investors are required to enter into contracts with the owner of the resource to extract the resource,” Namani said.
“With this concept, the ownership of the resource is not transferred until the point of the export and gives the owners of the resource flexibility in processing or marketing its share of production.
“This regime, Donigi says, is based on the principles that expertise and technology can be purchased or hired in the international market place.”
Donigi highlighted seven out of 10 countries in the Asia-Pacific – Bangladesh, Cambodia, Indonesia, Malaysia, Mongolia and Vietnam – were using production sharing contracts while those not using it were Brunei, Thailand and PNG.“Donigi stresses that nevertheless of this fact, Brunei and Thailand have a far higher return of above 60% revenue whilst PNG has the lowest at 22.5% for oil and gas, and 30% for minerals,” Namani said.“The seven countries that use production sharing contracts take above 70% of export revenue, with Indonesia ranging between 80-90%, and the contractor gets 10-20%.”