BUSINESSES that are seeking deals with the K40 billion liquefied natural gas (LNG) project are going to face difficulty in raising capital, an expert Australian accountant has warned.
And local commercial banks will have difficulties meeting their requirements for capital funding, Paul Cooper, director of Australia’s Chartered Practicing Accountants, said.
The Asian Development Bank (ADB) has seen that “that is a big issue for this region and they see the amount of money needed is not just for the project leader but also for the other contractors around it … it is possible that they are going to be short of capital,” Mr Cooper said.
“The banks here need to have their fund capital freed up to allow those contractors and sub-contractors to finance their way into those projects.
“That is going to be the biggest challenge … the size of the project is one thing, but it’s how the banks are going to fund all the other businesses around it,” he said when he addressed about 830 participants at this year’s joint CPAPNG/CPAAustralia conference in Port Moresby.
Mr Cooper made this observation as a reaction to a question from a participant on the effect of the LNG project on the country’s economy.
“So unless the World Bank, the International Monetary Fund (IMF) and anyone else with developmental funding come to the rescue, then I just cannot see how some of the companies surrounding it (project) would be able to pursue their business with LNG,” Mr Cooper said.
The conference was themed “surviving turbulent times” and reportedly was also attended by Fijian participants.
James Kruse, the national president for CPA Australia’s PNG branch also raised the same issues.
“This project woulld create its own issues and challenges for the businesses and institutions within this country, and of course the accountants and financial controllers within each of those entities,” he said.
And since PNG did not fully feel the impact of the global financial crisis (GFC), he noted: “Whilst PNG survived the GFC, we will nonetheless face our own turbulent times particularly as our economy extends massively with the potential LNG project about to kick off.”
Mr Kruse told the participants that the theme “surviving the turbulent times” was appropriate to the events of the past 11 months .