MARTYN NAMORONG | Namorong Report
PORT MORESBY - Treasurer Sam Basil’s recent economic update has highlighted serious cash flow issues for the Papua New Guinea government as it struggles to deliver the 2019 budget.
As Basil himself highlighted, the collection of corporate income tax, goods and services tax and departmental fees are all below target.
Prime minister James Marape recognises the dire predicament his government faces and so it was unsurprising that his first overseas trip was to Singapore to meet with the Board of the PNG Sustainable Development Program (PNGSDP).
PNGSDP is an independent entity, a status clarified by a recent ruling by the courts in Singapore.
It was born out of an arrangement where Broken Hill Propriety (BHP), now BHP Billiton, was offered immunity from legal liability for environmental damage created by Ok Tedi Mining Limited (OTML).
The arrangement involved BHP shares in OTML being transferred to PNGSDPL.
The deal that led to this was essentially to make PNGSDP responsible for covering successful claims against OTML for environmental damage. PNGSDP also indemnified the PNG government and BHP from any such claims.
Being an indemnity fund it needed to be created to be independent so as to be out of reach of both culpable parties while providing them with protection from future claims.
In others words PNGSDP is primarily an insurance policy and not a development fund. Development spending came as an afterthought from the primary objective of indemnifying GoPNG and BHP.
Thus PNGSDP is bit of a misnomer; it should probably be called the GoPNG-BHP Indemnity Fund.
The fact that OTML initially compensated 156 communities is recognition of legal liability for environmental damage.
Had the 157th community of Sepe-Auti stuck to its guns and prosecuted for favourable damage claims, it may have got a better deal than it did.
Instead, in 2012, it was shoved into the so-called Mine Life Extension (MLE) deal under which it is currently accommodated by as signatories to what is known as the Community Mine Continuation Agreement (CMCA) extension agreement.
When the O’Neill government expropriated PNGSDP’s stake in OTML in 2013 and opened the door to claims against OTML for damages, PNGSDP - as the indemnity fund – was obliged to protect the funds by withdrawing from PNG jurisdiction.
Whilst the rhetoric from O’Neill was that BHP’s immunity was removed, ironically the PNG government, as a shareholder of OTML, was also exposed to claims against it.
Now the cash-strapped Marape government wants to ‘Take Back PNG’ an opportunity exists to strike a new deal that ensures that both the government and the people of Western Province benefit.
Whilst PNGSDP is an independent entity, it is still governed by its programs rules, which dictate how it operates. The rules state that one-third of PNGSDP funds are to be applied for the benefit of PNG and the other two-thirds for the benefit of Western Province.
I am aware that PNG and Western Province leaders are currently seeking to negotiate how those funds are applied.
My advice to the prime minister and the Western Province leaders is that they first need to recognise the beast for what it is and give the beast what it needs — indemnity protection.
Once immunity is awarded to OTML and by extension BHP and the PNG government, I believe one-third of the funds should be disbursed in direct budget support to the PNG government and two-thirds to the Western Province.
The Western Province funds should be further disbursed in equal 20% amounts to Fly River Provincial Government, North Fly District Development Authority, Middle Fly District Development Authority, South Fly District Development Authority and to CMCA communities.
This latter amount should be managed by a new entity genuinely owned by the communities and not the elephants at the Ok Tedi Development Foundation (OTDF) who have failed the people for over a decade.
PNGSDP should stop pretending to be a development program and be honest to the people of Papua New Guinea and Western Province as to what kind of monster it truly is.
The Singapore Courts have already removed its clothes and revealed the naked truth about its true identity.
As BHP-Billiton bosses and Australians on the PNGSDP Board would recognise, it’s time for PNGSDP to be ‘fair dinkum’ with the Papuans of New Guinea.
PNGSDP’s role should be as the funder as it was originally created as an independent insurance fund and not a development program.
Its funds should be applied to improve governance and enhance the capacity of national and sub-national government entities to do their job — which is to deliver public goods and services to the people of Papua New Guinea and Western Province in particular.