Reform is in the air in Papua New Guinea, with the country’s resources sector facing major legislative changes. On the other hand, the government faces its own reform challenges if it is to secure the funding it needs to address its budget deficit.

Credit: Zijing Mining

‘PNG is not considered an attractive investment destination. We have to work to change that. Foreign direct investment is essential for a nation that is capital constrained. The COVID-19 pandemic throws an additional obstacle for all governments and industry.’

—John Gooding, former CEO, Highlands Pacific

Reform is in the air in PNG, as the Prime Minister’s ‘Take Back PNG’ agenda finally starts reaching the statute books.

The resources sector has been particularly targeted, and the changes introduced look likely to take some time to bed down. Certainly, the new resource laws and the shift to production-sharing arrangements has not gone down well with industry, which has been keen to debate the merits of the government’s changes.

But the Prime Minister’s recent address to Parliament and the absence of Petroleum Minister Kerenga Kua from an industry meeting earlier this month suggests minds may have been made up.

At the end of August, the government also controversially allocated the special mining lease for the Porgera gold mine to state-owned Kumul Minerals Holdings, a move that looks likely to intensify the State’s legal battle with previous leaseholder, Barrick Niugini. Can KMHL’s calm and experienced CEO Peter Graham succeed where the courts have not and broker a deal with Barrick to get the massive Porgera workforce back to work? It would appear to be a herculean task.

While the PM is still expressing hope that Papua LNG and P’nyang may move forward soon, the developers of both projects don’t appear to be getting their investors’ hopes up. Meanwhile, our expectations have been set for announcement on Wafi-Golpu at the end of this month.

An announcement would certainly do a lot for business confidence, as John Gooding’s words at the top of this email suggest. A lot of new investment, including the NEC-approved Ihu Special Economic Zone in Gulf Province, depends on PNG’s new gas projects going ahead.

Capital constraints

As the recently-released MYEFO and supplementary budget shows, the COVID-19 pandemic was the last thing PNG’s economy needed (although some companies, such as Paradise Foods, are reporting strong growth).

Without private sector investment, the government will need the support of international funds to cover its expected budget shortfall, and fund its infrastructure plans.

Given this, the Asian Development Bank’s proposed US$800 million filip looks enticing, although it should be noted that at least some of this money is attached to reforms the government much commit itself to – including much-needed reforms of PNG’s state-owned enterprises.

As our readers discovered during our most recent online business briefing, the ADB also has more funds for infrastructure and the Australian Infrastructure Finance Facility for the Pacific has also made its first PNG investment. (Notably, this investment is in solar energy, a sector looking to grow in PNG.)

PNG Now

Finally, you may have seen or heard about our new publication, PNG Now.

We’ve been wanting to publish a lifestyle magazine in PNG for some time.

Our local partner, broadcaster EMTV, and the many advertisers who have supported the inaugural issue of PNG Now appear to share our enthusiasm and we thank them for their commitment.

Please stay safe and well. I wish you every good fortune in these challenging times.