Plans to avoid ‘Dutch Disease’

National, Normal

THE Government is aware of the “Dutch Disease” implications of the PNG LNG project and are exploring options to set up stabilisation, infrastructure and future funds, Prime Minister Sir Michael Somare told Parliament yesterday.
“We are aware of the warnings by some of our external development partners regarding the adverse macroeconomic implications of the PNG LNG project in as far as the ‘Dutch Disease’ is concerned.
“I want to assure this House that my Government is looking at the issue now, almost four years ahead of first revenue from the project.
“In fact, we are exploring options to set up a stabilisation fund, an infrastructure fund and a future fund,” he said.
Sir Michael made the statement in Parliament yesterday with regard to finalisation of the Financial Close for the PNG LNG project.
“It is with pleasure that we have now received confirmation that financial close for the PNG LNG project has taken place and that US$14 billion in loans has been raised to develop our natural gas resources.
“Not only is this the biggest loan raised for any oil or gas project worldwide, it is also the biggest project ExxonMobil, the world’s biggest oil company, is undertaking as the project operator.”
Sir Michael assured the House that the Government was looking at the issues in setting up the funds.
He said the stabilsation fund would focus on the management of the 30% corporate tax and additional profits tax revenue streams with the aim of minimising any potential “Dutch Disease” impacts.
“This fund will be set up by Treasury, Bank of PNG, and National Planning, and will be geared towards the prudent management of these two revenue streams to responsibly finance the annual budgets within the confines of our development, fiscal, and debt management strategies,” he said.
Sir Michael said the infrastructure fund would focus on optimising the use of dividends from the State’s equity in the project to leverage and mobilise financing for critical nation-building infrastructure like power, aviation, ports, water, roads and others.
“My Government wants PNG to make a quantum leap from its current low income status to become a middle income level country within 20 years.
“As a country, we want to achieve our national development targets which are clearly articulated in the recently approved long term development strategy from 2010 to 2030,” he said.