The mobile squads already are the mining industry's private security force Gari

Gari Baki has recently raised concerns over the RPNGC's relationship with Exxon Mobil. In particular, he claims: "If we allow LNG to be continuously funded by Exxon Mobil then there is no independence of the constabulary ... and the perception and the notion is that it is just another private security company for the LNG" (Radio Australia, 22/11/10). How genuince this concern is, may be questioned (what has he done about the below situation in Porgera?). Nevertheless the issues Gari Baki raises are important ones. The implications of mining capitals power to dictate policing priorties are identified in the following extract taken from the Legal Brief (2009) on the Porgera Joint Venture (PJV) filed by the International Human Rights Clinic and the Centre for Human Rights and Global Justice:

For a full copy of the Legal Brief see: http://protestbarrick.net/article.php?id=624

Tax Exemptions for the LNG Project

Asia-Pulse  (23/11/2010)

The multi-billion dollar Liquidified Natural Gas (LNG) project in Papua New Guinea will be exempted from import duty during its construction and preparation phase according to the Customs Tariff (2011 Budget) (Amendment) Bill currently before parliament.

The Customs Tariff Amendment bill is attached with the batch of 2011 Budget bills that were tabled in Parliament on Tuesday last week.

The bill clarifies any doubt about the import Duty Exemptions granted to the PNG LNG Project to be consistent with the intent of the PNG LNG Gas agreement, the budget.

The same amendment bill if passed will implement further reductions to import duties over a period of seven years.

According to Internal Revenue Commission (IRC) Deputy Commissioner of Operations John Pomoso the bill is aimed at achieving a more uniform as well as lower tariff rates; and to encourage a more efficient and productive private sector.

Mr Pomoso said the reduction to import duties and low tariff rates will gradually lead to lower prices for basic goods including food items.

From 2012, the Tariff Reduction Program will reduce input costs for many businesses, reduce the cost of development activities and reduce the price of many consumer goods, Mr Pomoso said.

Other budget bills include the Income Tax (2011 Budget) (Amendment Bill) which when passed will impose a penalty on directors of private companies for failing to take action on notices from the IRC on unpaid salary and wages tax.

The passage of the amendment to the Income Tax bill will ensure that a specific reduction tax is given to companies that are environmentally friendly and cause less pollution to the environment.

Sovereign Wealth Funds - Part 2

Peter Johnson (2010) from the National Research Institute, after considering global experiences with wealth funds, concludes that if the Sovereign Wealth Fund is to achieve its goals then:

"The PNG Government must also build the capacity of the public service to develop and

implement programs that achieve the goals of the Medium- and Long-Term Development

Strategy. Returns on economic and social expenditure will only increase if development

priorities are well developed and implemented. Under economic pressure the rules protecting resource revenues have historically failed, and the political tide has largely succeeded to the detriment of PNG.

The framework and the institutions that are responsible for the resource fund and spending those funds will determine if PNG succeeds or fails to develop from the proceeds for its latest boom. In broad terms, to overcome what has historically been low (and sometimes negative) social and economic returns from resource revenue, policy makers must design appropriate safeguards against poor public policy choices, a lack of governance, transparency and accountability, rentseeking behavior and corruption".

These conclusions are not new, Papua New Guinea's Auditor Generals and Ombudsmans have been making them since the early 1980s. Perhaps a substantial shift in the political terrain of the country is required, one directed from below.  

For Johnson's paper please follow this link.

The Department of Treasury and the Bank of PNG have also released a discussion paper on the Sovereign Wealth Fund, follow this link.

Sovereign Wealth Funds - Part 1

Mohammad Bashir on Sovereign Wealth Funds (Post-Courier, 23/11/10)

The development of the PNG LNG project and the prospect of others will not only transform the country’s economy and improve living standards but as a major revenue source, it will give rise to macroeconomic pressures which are more likely to be prevalent due to the heavy reliance on commodity based revenue.

In the 2011 budget handed down last week, the Government considered and agreed to a joint Treasury-Bank of PNG working group’s work and the separate work undertaken by the department of Public Enterprises on alternative arrangements to help manage the significant revenues arising from this project to be used for PNG’s development needs while promoting macroeconomic stability.

As a consequence, the Government has decided to establish a Sovereign Wealth Fund consisting of a consolidated pool of offshore funds with three co-ordinated and integrated funds with all expenditures being through the budget process. Those co-ordinated funds include a stabilisation fund, a future (savings) fund and an infrastructure fund.

To oversee the establishment of the offshore Sovereign Wealth fund for PNG, the Government has established a secretaries committee on Sovereign Wealth fund that will take all necessary steps to establish this important undertaking.

In a discussion paper dated April 16, 2010, among many issues, the working committee noted that a robust fiscal framework was necessary to support the management of the windfall envisaged from the LNG project to underpin social and economic development.

From past experience, the Mineral Resource Stabilisation results were mixed and eventually closed in 1999 when the entire remaining balance was drawn down. Trust accounts although had apparent successes, the committee noted that it had significant limitations.

With LNG revenues expected to commence in 2014, through dividends and substantial tax revenues, the most immediate impact on the economy is expected to a sizeable appreciation of the kina. The committee further noted that it will also be difficult to predict the extent the currency will appreciate as it depends on a range of other factors.

After various considerations in terms of fiscal framework, domestic liquidity, inflation and macroeconomics limitations of onshore funds, the committee considered offshore fund as the preferable option.

An onshore fund would also be invested in the local economy in a manner determined by the Government through the annual budget process as a rate that does not unduly appreciate the currency or cause undue inflationary pressures.

From a development and investment standpoint, the committee noted that the extent of Government spending should be in accordance and consistent with PNG’s development needs and plans while maintaining macroeconomic stability.

Edited Transcript from Yesterday's Baki Interview

Suspended Police Commissioner, Gari Baki, 22/11/2010, Radio Australia.

Baki: Ten million kina was a result of the briefing I gave to cabinet. Specifically mentioning the fact that the LNG operations up in the Southern Highlands is basically being funded by Exxon Mobil. All police operations up there is entirely funded by Exxon Mobil ... It is for the LNG and the LNG corridors ... If we allow LNG to be continuously funded by Exxon Mobil then there is no independence of the constabulary ... We would lose our constitutional independence, and the perception and the notion is that it is just another private security company for the LNG. And that is why I made representations to the government ...  and I want the government to assist me in terms of funding.

"All Police Operations Up There is Entirely Funded by Exxon Mobil" - Gari Backi

Radio Australia - 22/11/2010

Papua New Guinea's suspended police pommissioner, Gari Baki, maintains that he never lied or misled the government over a $US4 million fund for security operations for the country's Liquid Natural Gas Project.

Mr Baki says the monies were part of funds he had requested and had approved by cabinet for use by the police in providing security for the multi-billion dollar LNG project.

He says it is not right for the police to rely on developers to pay for police security operations for the project.

Mr Baki says he was pleased when cabinet approved the funds.

"I made that plea to the government to ensure that we get this ten million [kina]," he told Radio Australia.

"It is part and parcel of the 101 million kina mobilisation budget that I have submitted to the government to assist in the policing of this island strategy."

For more, listen here.

PNG rides resource boom with big budget

By Ilya Gridneff AAP 16/11/10

The Papua New Guinea government continues to ride the resource boom, handing down its largest ever budget of nearly 10 billion kina (A$4 billion).

PNG Treasurer Peter O'Neill announced on Tuesday the 2011 National Budget of 9328.1 million kina ($A3731.2 million) had been boosted by a supplementary budget of 653.3 million kina ($A261.3 million).

"This announcement of nearly 10 billion of expenditure is the biggest spending announcement ever witnessed in PNG and provides us with a great opportunity to build up our nation," Mr O'Neill said.

"The outlook for 2011 is very positive, with the PNG economy forecast to grow by eight per cent, which represents 10 years of uninterrupted economic growth," he said.

PNG's strong economic positions stems from the prolonged mineral boom and a massive ExxonMobil-led Liquefied Natural Gas that will come online in 2014 and bring billions in revenue for the next 30 years from gas sales to Asia.

"We can not underestimate the opportunity the PNG LNG project offers to transform our economy and substantially improve our socio-economic development," Mr O'Neil said.

But the "balanced" budget warns "the emergence of LNG as a major revenue source will give rise to macroeconomic pressures," he said.

PNG inflation in 2011 is estimated to average around 8.2 per cent, he said.

Resource-rich PNG has failed to translate its numerous mineral-related revenue streams into real development for its population.

Chronic underfunding for police, the courts and jails has fuelled a law and order problem and has led to a heavy reliance on aid, including more than A$457 million annually from Australia.

This budget saw increased funding to all the key areas outlined in PNG's development strategy.

Education and health were winners with 139.9 million kina (A$55.9m) and 90.5 million kina (A$36.2m) respective increases while the government will provide 121.2 million kina (A$48.5) more to the transport sector, mainly for much needed road building.