Ownership not equal to more revenue: Official

By PETER ESILA
A HIGHER ownership share for the Government in resource projects does not necessarily mean that it will get more revenue from the resource, an economist says.
Marcel Schroder, an economist in the macroeconomic research division at Asian Development Bank, said in most deals, the Government proportionally incurred capital expenditures or operation costs.
Recently, a new agreement was signed for the reopening of the Porgera mine in Enga, where the State now owns 51 per cent of the mine, there are talks for a better State share in Wafi-Golpu project in Morobe.
According to a statement from Twinza Oil Ltd, this week, the Government informed the company on April 16, that it now required a six per cent production levy in order to sign the agreement.
This is four per cent higher than the production levy that was agreed to as part of the comprehensive terms for Pasca A, negotiated by the State negotiating team and announced by Prime Minister James Marape, last Sept 24.
“Investors might also be happy to share the project’s risks with the government,” Schroder said.
“On the other hand, governments of resource-rich developing countries typically lack the expertise to efficiently operate mines or gas fields.
“Because of this, the total rents extracted from a project may be less and so the Government may get a larger share of a smaller amount of resource revenue, overall, receive less.
“In the end, tax instruments such as corporate income tax, royalties, or production levies could generate higher revenue than the Government taking out or increasing its ownership share especially if the latter is done through debt financing.”