FINANCE and Rural Development Minister Sir John Pundari says Papua New Guinea’s current state of economy must be clarified for Papua New Guineans, international stakeholders and the private sector to better understand the nation is progressing economically.
“The former Government inherited and enjoyed an ideal economy that had all the hallmarks for growth and prosperity in 2012,” he said.
“With the construction of the PNG-LNG project in 2010 and expected injection of much needed funds from the project, PNG’s economy was expected to pick up and maintain stability and propel economic growth, but sadly this was not realised.
“PNG has experienced a slowdown in general economic activity in the last couple of years.
“Post PNG-LNG construction after 2014, the country’s economy was cushioned by Government spending in the 2015 South Pacific Games and preparations for the Asia Pacific Economic Cooperation (Apec) Summit in 2018.
“These activities were financed through domestic and international loans, hence any sense of growth was artificial.
“Post-Apec, there hasn’t been any stimulus to propel economic activity and growth.”
Pundari said any expected cash inflow into the Government coffers from the sale of LNG from the PNG-LNG Project had been mortgaged to the infamous UBS loan, hence it was eating into the cash flow of an already overstressed economy.
“Financing the Apec Summit from borrowed money and the alleged mismanagement of funds did not help an economy that was already overheated, and any sense of economic benefit could not be sustained, hence the downturn in the PNG economy after Apec,” he stressed.
Pundari said the Marape-Basil Government inherited an economy that was on the verge of collapse with rising unemployment rates, rising inflation, low export earnings leading to very low import cover and foreign currency reserves, decline in foreign direct investment, decline in domestic investment, high interest rates and an increase in socio-economic issues that were symptoms of a sick economy.
He said Prime Minister James Marape, realising the lost opportunities in the big mining and petroleum projects, took a calculated risk to sacrifice short-term pain for long-term gain.
“Our prime minister requested what is rightfully ours from the developers,” he said.
“Marape was fighting for his shareholders, the people of PNG.”
Pundari stressed that this was an opportune time as the resources were finite and if there was going to be a change in the status quo, “it is now that this has to happen, and our investors and other stakeholders need to realise that the Government is only asking for its rightful share and this stand must be respected”.
He emphasised that the misunderstandings by the companies concerned had led to the breakdown in negotiations with Total, ExxonMobil and WGJV to pave the way for their construction phases, closure of Porgera gold mine and the negative economic and social impacts of Covid-19 had all led to an economic downturn in the country.
“Our plight has not been helped with the emergence of the coronavirus (Covid-19) pandemic which is affecting the world,” he said.
“For a small economy that has been on the brink of collapse, this is catastrophic.
“At this juncture, I want to assure our people and key stakeholders that our Government is in control.
The Government has done all it can within its powers and with the help of our development partners and friends have been trying their outmost best to address this imminent double-edged health and economic crisis.”
Pundari confidently announced the Marape-Basil Government’s short-term measures to better pursue the recovery and stabilising of PNG’s ailing economy as “actions in the right direction”.
“The Government, under the leadership of Marape, has used the tools that are at its disposal to stabilise, stimulate and grow the economy in the short-term,” he said.
“Some measures that have been taken so far include:
- INJECTION of money into the economy through making funding available for small medium enterprises (SMEs) to obtain loans from BSP and NDB. This will hopefully support and grow the SMEs that have been adversely affected by the Covid-19 pandemic as well as the economic slowdown;
- INJECTION of funds into the economy through infrastructure development nationwide under the Marape-Basil Government.
- MANAGEMENT of the Covid-19 pandemic through an Act of Parliament and funding the control and management of the spread of this deadly virus.
- EXTERNAL debt and loan restructuring in an effort to refinance expensive loans with concessional loans so much needed cash flow can be freed for other development purposes;
- THE Marape-Basil Government is working around the clock to finalise negotiations for the Wafi Golpu mine and Porgera mine to commence construction and operations, respectively. This will help bring in much needed foreign currency as well as stimulate economic activity.
- PRIME Minister Marape is progressing well to strike a deal with Barrick Niugini Ltd and the mine will be reopened soon on our terms. The final negotiations in the near future may lead to the reopening of Porgera mine which has been closed for almost a year now. This will be a milestone achievement for our people in taking back our resources; and,
- THE Marape-Basil Government is also nearing conclusion of negotiations with ExxonMobil PNG Ltd and Total SA to commence next steps for the Papua LNG Project and the P’nyang Expansion Project.
Pundari appealed to all stakeholders of Wapi Golpu and Porgera to understand the plight of the country and for the sake of Papua New Guineans: “I appeal for a speedy conclusion in those discussions and get the mines going ASAP (as soon as possible).”
He also appealed to the good management of Ok Tedi to apply strict Covid-19 measures and to do their level best in keeping the mine open.
“These are tough times economically and your sacrificial commitment in ensuring a Covid-19 free operation is a sure gift of love to the people of PNG.”
Pundari stressed that the Marape-Basil Government had over the last two years laid the foundation for long-term growth and success of the country’s economy whilst addressing short-term issues and challenges.
“The main longer-term focus of this government has been institutional development, strengthening the pillars and capacities of our country’s development agenda, that includes;
- ICAC Bill was passed to fight corruption, which is more organised, systemic and systematic. Corruption has eaten into the development funds and resources of the country for too long. This Government has established the legal framework to fight corruption in a more organised fashion;
- FISCAL terms of investors in the resource sector have been changed. All investors will, from now on, pay their equal share of tax and royalties back to the Government and her people. PNG will no longer be a spectator whilst its resources are plundered and shipped overseas. The foundation has been laid for PNG to be at the dinner table rather than feed off crumbs on the floor;
- NATIONAL content policy and reserve business policies have been developed to support local SMEs to participate in business opportunities in the country. This will enable SMEs to harness opportunities from investments from both the private and public sectors. The backbone of any country is the thriving local private sector comprised of mostly locally owned businesses that not only pay their tax and provide employment but in a complex cultural setting like PNG, they play a key role in maintaining social order and peace in the villages and communities; and,
- TAKE Back PNG is a slogan that the Marape-Basil Government has adopted to promote its agenda in winning the land, economy and the country back for its people. Most policies and legislations that have been formulated and implemented are geared to fulfilling this policy.
Pundari also proposed the following complementary policies and legislative changes to the Government through internal economic ministers meetings:
- IN addition to improving Goods and Services Tax (GST) collection efforts spearheaded by IRC through GST 65A project in IFMS, a similar platform can be used to collect GST from the private sector when transactions are made at banks. Necessary legislative framework needs to be put in place by Treasury and the Central Bank to ensure banks collect the 10 per cent GST for all company transactions and funds remitted straight into the Government Consolidated Revenue. Banks can charge a fee if need be. This will improve tax collection from the private sector;
- BPNG should reduce interest rates to make it cheaper for businesses and entrepreneurs to borrow and invest;
- BPNG and Treasury must make banking easier and more efficient, and get rid of unnecessary red tape, to harness the ‘Black Cash Economy’. The unbanked cash in the hands of the public is estimated to be in the billions of Kina because of the inefficient banking system in the country. People keep hard cash rather than deposits with banks. Get rid of the unnecessary bank fees and streamline the operations of the banking system by the Central Bank. Another such measure would be to change the features of our currencies so that the billions of Kina that does not make it to the banks will be deposited and black economy can be discouraged and killed;
- THE Bank of PNG through its FASU committee must relax bank criteria for deposits and payments on the back of the so-called money laundering laws. Making business harder by applying excessive criteria to manage money laundering is forcing honest business houses to go into the black economy – i.e: why should a simple bank transaction of a business-to-business trade be made difficult by commercial banks i.e one business wanting to purchase a generator from another business on pure business invoice sales and purchase arrangements. The deposit for that transaction is given a run around by banks. If BPNG and commercial banks are so deeply concerned about money laundering then allow the transactions to take place and you have an easy tract to investigate questionable deposits. During the pandemic is not the time for the know it all to cause unnecessary issues and problems on the back of a struggling economy;
- STRENGTHENING the capacity of government institutions like IRC and Customs to improve tax collection, especially to go after those that are trading in the black economy ( non-compliant traders, as in cash trades) and companies that continue to declare loses year in year out from small SME’s to mega gold miners … do immediate comparative analysis as to why i.e.: a small security company pays more tax than a bigger security company possibly owned by a foreigner and start rigorous audits on them .., the same can be said about wholesalers, retailers, exporters etc;
- ENCOURAGE all SMEs, both local and foreign owned, to bank their income through mandatory and harsh measures, if needed. This can include mandatory use of EFTPOS machines. IRC and customs can play a crucial role in ensuring tax compliance, etc.
- SUPPORT SMEs through subsidising bank loans. Currently, this is being done with BSP and NDB. More money needs to be set aside, streamline the process to make it easier for small SMEs to borrow and support their capacity building programs so the loan can be used to create sustainable local businesses that can be able to operate and repay loans as well as tax to the Government; and,
- STRENGTHENING capacities of all SOEs, State Departments and Agencies to promote efficiency, effectiveness and enhance productivity. These structural reforms are needed for most agencies as they continuously fail to deliver on their mandate. An effectively run government machinery is key to PNG achieving economic independence and global competitiveness.
The veteran politician, one-time youngest Parliament Speaker in the history of the Commonwealth Nations and a former deputy prime minister said: “The interventions can lead to the Government stabilising the economy and lead it towards recovery. But to complement and sustain the economy, the Government needs to look at long term policies that can help PNG grow at a sustaining rate.
“I did a detailed summary of what happened to our economy and what is expected to maintain a healthy status of the general state of our economy. The above factors that are included in the short-term and long-term measures and the points detailed in the other key areas can and will address the capacity issues that are the major constraints and impediments to the growth and development of Papua New Guinea.,” Pundari said.
He reiterated that, on the back of the passing of one of our iconic and uniting leader, every citizen across this nation should refrain from all forms of corruption.
“All corporate small to large and all citizen across this land should resolve to pay an honest tax to the Government … it is high time every one ask these simple questions.
“We all love our country, every one of us, including our leaders and citizens. Sometimes we have shortfalls and it is by being genuine and having honest conversations, we will find a way forward,” he stressed.
Pundari assured the nation and both national and international stakeholders that the Marape-Basil Government was committed to addressing the current plight of the economy in order to set the economic foundation of the country on a firm base upon which a growing country can economically prosper.