AUSTRALIA will help the PNG Government set up a sovereign fund that will channel revenue from the PNG LNG project.
The sovereign fund will capture between US$10 billion and US$15 billion in proceeds from the Government’s equity in the project.
Legislation is expected to be brought before Parliament for approval to enable this, Public Enterprises Minister Arthur Somare said yesterday.
Mr Somare, National Planning and Development Minister Paul Tiensten and Public Service Minister Peter O’Neill met with their Australian counterparts in Canberra last month to discuss the fund.
The talks were held in view of plans by the Australian government’s Export Finance Insurance Corporation (EFIC) to provide substantial loan finance for the US$15 billion (K42 billion) PNG LNG project in the form of tied concessional loans for purchase of Australian goods and services.
Mr Somare said the Government wanted to have in place good governance and transparency regimes to protect future government revenues from the PNG LNG project and maximise the nation’s development potential.
“We have held official and ministerial level discussions on Australian assistance for development of a robust and transparent governance regime covering taxes and dividends from LNG received by the PNG Government,” Mr Somare said in a statement.
He said the Australian government sought reassurances on the commercial risks of the PNG project and was seeking clarity on its potential to transform both the PNG economy and Australia-PNG bilateral relations.
Australia’s trade minister Simon Crean said the Australian government was ready to assist PNG to create “a transparent, robust legislative framework” that would govern how revenues generated by the LNG project were best managed and utilised.
Detailed work is also being undertaken by PNG’s Ministry of National Planning and Development with the assistance of Australian technical experts.
The main features of Australia’s assistance will cover:
*Economic modelling under a team of international economists led by AusAID’s chief economist. This model would provide guidelines for the ideal use of government revenues from LNG;
*Technical assistance in resource tax administration, implementation of a revenue stabilisation fund, creation of a sovereign wealth fund and other relevant
*Support for training and skills development to complement ExxonMobil’s plans for the Port Moresby Technical College by assisting the Pomtech management to eventually administer these facilities.
“I believe this is the first time in our history that a PNG government has sought to have in place specific governance regimes to cover a major resource development,” Mr Somare said.
“Indeed, this is six years ahead of first gas and first revenue flows.
“These measures will minimise corruption and ensure that the additional US$50 billion in taxes and dividends that will flow to the PNG Government over a 20-year period will transform every aspect of life in PNG,” Mr Somare added.
“The National Executive Council will consider the establishment of a sovereign wealth fund as a sustainable long-term vehicle for the 19.4% equity held in the LNG project through the Independent Public Business Corporation.
“It will look at implementing governance guidelines and procurement processes to ensure better service delivery mechanisms.
“With the help of Australian government experts, Parliament will be able to enact sovereign wealth fund legislation that will determine optimum use of LNG project dividends with an eye to maximising infrastructure spending through the development budget,” Mr Somare said.