Prime Minister gives upbeat take on Papua New Guinea’s economy

The Prime Minister, Peter O’Neill, speaking at the Business Advantage
 Papua New Guinea Investment Conference in Brisbane, said the mid-year assessment of the economy was better than anticipated. He said the growing investment interest in the Pacific being shown by China, Australia and the United States is ‘healthy’.

‘Last week we finalised the Mid-Year Economic and Fiscal Outlook, and it was more positive than we had anticipated,’ said O’Neill.

‘The recent earthquake, and lingering effects of the past drought have impacted the economy, but we have recovered well.

Treasury is now forecasting positive GDP growth for the year.

‘This is a welcome turnaround after months of challenging conditions.’

Balance

O’Neill said the government is ‘working hard’ to deliver new projects including Wafi-Golpu, the P’nyang LNG expansion and Papua LNG, but flagged that PNG would be pushing to get a better deal for itself.

‘We will make better use of our national resources.

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‘The first LNG [undertaking] was a unique project. It was a foundation project, so we gave a lot of concessions that are not normally given to such a project.’

O’Neill said the ‘last thing we want to do is change the fiscal regime of these projects’, but he did call for a more balanced negotiated outcome.

‘For many years we have been told that we would have Dutch disease—the economy will suffer as a result of that.

‘The last thing we want is to experience what we have experienced where there is less foreign currency.’

‘This perception has led us to allow companies to park export revenues in foreign accounts.

‘Right now, we are renegotiating that. We need some rebalancing in some of the new projects that are being put up.

‘Because the last thing we want is to experience what we have experienced before, where there is less foreign currency; less imports come in; key infrastructure that we need to rebuild, based on the import of materials, [comes to a] standstill; people lose jobs.

’So the cycle continues—and that is what we want to avoid. We need to make sure we have enough influence to mitigate this problem.’

Mining Act

O’Neill said another mistake that has to be avoided is only establishing the rights of landowners after the project is completed.

‘The transparency and visibility of the landowners must be clear.’

‘I will be encouraging vibrant discussion between the mining community and government.’

O’Neill said the government has ‘tried to learn’ from its previous experience.

He added, however, that he can ‘assure the business community’ that the government’s fiscal regime will remain stable.

‘I will be encouraging vibrant discussion between the mining community and government.’

The government, he said ‘has to reflect the will of the people’, but ‘that doesn’t mean that is the position that we will finally conclude.

‘We will have to negotiate the outcome that is beneficial to everyone.’

Infrastructure funding interest

O’Neill welcomed the increasing interest in funding infrastructure in the Pacific that is being shown by China, and a trilateral arrangement between Australia, the United States and Japan.

‘What we want to do is improve the standard of living for our people.’

‘It is healthy that there are competing sources of finance for much-needed infrastructure in the region, because we are prone to many challenges.

‘Take climate change for instance. Or cyclones, [which create] challenges for infrastructure and the rebuilding of many communities in the Pacific.

‘We need to have access to cheaper funds and that means that the competition between China and Australia and the United States [about making available] funds to the Pacific, including countries like Papua New Guinea, at much lower rates is in the best interest of our countries.

‘We welcome those initiatives, although we cannot do business with every one of them.

‘We have no competing interests over geopolitics, or political issues.

‘What we want to do is improve the standard of living for our people and we will do the best deals [we can].’

Comments

  1. We need to have access to cheaper sources of finance to build impact economic infrastructure like quality world class roads and highways linking our major urban population centres like Port Moresby and Lae. We need to open up the missing-link roads like the Southern Highlands-Gulf Highway, Jiwaka-Madang Highway and rebuild the Highlands Highway into a World class 4-lane road from Lae to Kikori. These roads will contribute to encouraging increased levels of economic activity in the country and will help to repay the loans we get to build such economic roads. Also, the new corridor or missing-link roads will open up and enable communities which have not participated in any form of economic activity to start participating in modern economic activities hence increasing the economy and GDP of the nation. We also need to borrow money to build new hydro-power plants and gas fired power plants to increase electricity penetration in the country to about 70% or greater by 2030 as the PNG government anticipates to enable once again more economic development of the country by empowering our people to engage in business activities by making use of cheap electrical energy. As such, the attempt by the United States, Japan and Australia to assist developing countries like PNG in the Asia – Pacific region by providing cheap loans for building impact economic infrastructure is most welcome. We have started borrowing from the Chinese so far, but if the other three countries can offer cheaper and competitive loans for infrastructure development in our country, that is good news. Loans are not bad, so long as we can invest the funds on impact economic infrastructure that will help to repay the loans in the future just like in any business venture.

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