PNG’s date with destiny


27 November is looming large as a key date for Papua New Guinea, with the date nominated for concluding negotiations between the State and developers over the ExxonMobil-led P’nyang gas project.

Prime Minister James Marape opening the Innovation PNG 2019 Conference earlier this month.

With P’nyang, like the Total-led Papua LNG project, likely to share much of the PNG LNG gas project infrastructure, the developers appear keen to ensure that agreements to both new gas projects are signed before committing major expenditure to either.

As Westpac economist Justin Smirk observed last week, ‘If P’nyang does not proceed, the economics of Papua LNG changes.’

The Government, on the other hand, wants the two new projects treated separately, in the expectation of being able to negotiate a better deal for P’nyang, Western Province’s first gas project.

The next few weeks will show us whether the two sides can be reconciled (some are already suggesting an agreement may not be executed until January). If they can’t, delays to both new gas projects look likely.

This would disappoint a business community that had great expectations at the start of this year, even though most businesses are not budgeting for the extra turnover that could come from the gas projects – if and when they go into FEED.

The end of this month will also bring us the last sitting days of Parliament for this year and the 2020 National Budget, likely to presented on 26 November.

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The Budget has been delayed by a couple of weeks, in part to ensure that the budgetary support the government has requested from the Australian Government and the Asian Development Bank, is in place.

Assuming the support is confirmed, the Budget is still likely to be a sobering one, as the Treasurer, Ian Ling-Stuckey, flagged in the recent Supplementary Budget. Some experts are suggesting a Capital Gains Tax and new tax regime for SMEs could be on the cards.

Faced with PNG’s ‘economic paradox‘, the Treasurer has committed the Government to addressing its sizeable budget deficit, and also reducing the cost of servicing its increasing debt.

Too much government debt has been borrowed at commercial interest rates, especially debt held by state-owned enterprises. Treasury’s progress in refinancing this debt at lower interest rates will be one thing to look for at the Budget lock-up.

The next sitting of Parliament will also be the last chance this year for the Government to progress some of its reforms, including Special Economic Zones and a new Mining Act (which will need to take into account how the global industry is changing).

In more positive developments, not all SOEs are struggling. Our recent exclusive interview with MD Alan Milne suggests national airline Air Niugini is getting back on track.

Meanwhile, PNG Dataco says the Coral Sea Cable is likely to be complete soon – an advent already causing much discussion about pricing, and how the benefits of the cable will reach the more remote parts of the country. (Meanwhile, market leader Digicel is arguing that the cable is unlikely to be the silver bullet to the country’s connectivity challenges.)

The launch of the cashed-up US Development Finance Corporation looks set to help cash-strapped utility PNG Power, which is currently involved in frequent load-shedding.

It’s also worth noting the increasing investment in innovation. As this month’s Innovation PNG Conference highlighted, there are a lot of organisations, large and small, focused on providing PNG solutions to PNG problems.

BAI’s Andrew Wilkins

Two companies were winners in the inaugural Innovation PNG Awards. S P Brewery’s cassava project shows how PNG’s expertise in agribusiness can drive the development of new manufacturing while, at the SME level, Sustainable Alluvial Mining Services is showing how to resource and encourage the nation’s 100,000 small-scale miners.

The last weeks of 2019 will be crucial in determining what sort of year 2020 will be. Our team of professional journalists will be keeping a close watch for you, and talking to the people in PNG who know what’s really going on.

Andrew Wilkins is the Publishing Director of Business Advantage International.

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