Prime Minister James Marape has outlined a two-pronged economic strategy to boost Papua New Guinea’s economy. He has also commented on the government’s attempts to manage the country’s rising debt, reports David James.
Prime Minister James Marape with Port Moresby Chamber of Commerce and Industry Treasurer, Akae Pa’asia Beach, and Emstret Holdings’ Vani Nades. Credit: POMCCI
Speaking at a Port Moresby Chamber of Commerce and Industry event last week, the Prime Minister of Papua New Guinea said the focus of future budgets would be to stimulate economic growth and pointed to agriculture and tourism as two sectors with the greatest upside for the broader population.
Marape said the country’s burgeoning population, which has been growing by three per cent a year since its independence in 1975, increases the pressure to broaden the country’s business base. He argued this required aggressively developing the Small and Medium Enterprise (SME) sector.
Boosting the SME sector
The government will be injecting K200 million a year for the next 10 years into the micro, small and medium enterprise sector, said Marape. There will also be tax concessions available for companies or individuals who meet the criteria.
‘We have already given big tax incentives to oilers and miners in our country, why not give them to existing businesses so they can expand?’
The government allocation to SMEs would not be done by parking money in the Department of Treasury or Department of Commerce, Marape said, as this could result in ‘everyone shopping papers to pull a fund.’
‘I deliberately brought in a new Treasurer to assess the numbers we always had questions about … Those figures will be used to extrapolate our projections for 2020 and nine years of budgets.’
According to the Prime Minister, the government will work with the National Development Bank, which he explained will need to ‘step up’ its game. The government also intends to work with commercial banks.
‘We will partner with BSP and other banks to ensure [they] support SMEs very well. We want to inject funds into our financial institutions. For those already in business – you will have a special quarantined pool of funds if you are struggling and you want someone to help you refinance your debt in your business.’
‘Steroids’ for the economy
The second prong in Marape’s economic strategy is to facilitate resource projects, which he likened to ‘steroids’ for the economy.
A week before this conference, the Prime Minister said in parliamentary question time that negotiations for ExxonMobil’s P’nyang gas project – which would add a third LNG train to its LNG plant in Central Province – were separate from those for the recently-approved Total-led Papua LNG project (which is likely to add two trains to the same plant), and that his government would not be giving any concessions.
‘We have already given big tax incentives to oilers and miners in our country, why not give them to existing businesses so they can expand?’
In his speech, however, he expressed optimism that a third train would go ahead. ‘I want to work with ExxonMobil to get the third train at the earliest. If we do three trains of gas, then in the next 10 years we can easily go past a K150 billion economy.’
Marape was also positive about the Wafi-Golpu mine and said the government is also in negotiations with the operators of Porgera gold mine, whose lease is currently under review, to ‘harvest’ the mine properly in the national interest.
The Prime Minister also outlined two other initiatives: development of Special Economic Zones and to increase downstream processing.
He said every current operator in the forestry sector will, by end of the year, be required to submit their plans to go into downstream processing to the National Forestry Authority.
‘By the end of next year, we will have an inventory and systematically work with them to ensure that we fully mature our forestry downstream by 2025 and beyond.’
Importance of accurate figures
Prime Minister James Marape
With regards to the Supplementary Budget released earlier this month, the Prime Minister explained it was introduced to normalise PNG’s financial accounts in order to make budgetary planning accurate and make it easier to raise external debt when necessary.
‘I deliberately brought in a new Treasurer to assess the numbers we always had questions about.’ He said getting economic figures right is important. ‘Those figures will be used to extrapolate our projections for 2020 and nine years of budgets.’
He said the previous government treated some debts differently. This especially applies to state guaranteed loans. He said debts for state-owned enterprises’ loans have been ‘re-accounted’.
Speaking about Parliament’s decision to raise the country’s mandated debt-to-GDP ratio to 45%, Marape said the aim is to ‘secure confidence’ with donor partners, multilateral institutions and ‘interested stakeholders in our economy.’
He said the Supplementary Budget indicated that PNG is ‘under-capitalised’ and that there would be efforts to raise more debt, provided the interest rates on the loans do not ‘exceed 5 per cent.’
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