Govt’s commercial ops impacting on economy

THE commercial operations of the Government are having a big impact on the economic activity and cost of doing business in Papua New Guinea (PNG).
The Government controls mineral, oil and gas assets (Mineral Assets) through its 100 per cent ownership of Kumul Petroleum Holdings Limited and Kumul Mineral Holdings Limited (including their subsidiaries).
The Government also owns and controls Non-Mineral Assets through its 100 per cent ownership of Kumul Consolidated Holdings (KCH).
KCH then owns and controls PNG Power Limited, Telikom PNG Limited, DataCo Limited, BMobile, Water PNG Limited, Post PNG Limited, PNG Ports Limited, Air Niugini Limited, and a number of large agricultural estates.
The Government’s Non-Mineral Assets are ineffective and inefficient, and are very costly to maintain at present.
They are also costing tax-payers so much in public money to maintain through National Budget funding.
The Government’s Mineral Assets are diverting mineral and petroleum revenues, from the National Budget.
Thus, forcing it borrow more money from domestic and external sources to fund the National Budget.
The borrowing from the International Monetary Fund (IMF) is causing inflation in PNG, through the Kina exchange rate depreciation which was imposed on the Government as a condition for IMF loans.
The Government’s commercial policy on mineral assets and non-mineral assets needs a structural revolution to support the economy and national budget.
Assuming, the Government wants to retain its ownership, then the first option is to introduce production sharing arrangement (PSA) for its Mineral Assets and Non-Mineral Assets.
PSA is a proven concept in the world.
Under the PSA, the Government can bring in commercial contractors to manage the Assets on its behalf for a fee.
The second option is to sell off and privatise the Non-Mineral Assets, and manage the Mineral Assets under the PSA concept.
The will enable the Government to prudently manage the National Budget, and avoid the debt distress situation it is currently in.

Concerned Economist