State of Papua New Guinea Public Enterprises

Statement in Parliament by

The Rt Hon Mekere Morauta, KCMG MP, Minister for Public Enterprises

24 November 2011

 
 When the O’Neill-Namah Government took over from the Somare regime in early August, I was given the task of sorting out the mess which had been created among all of the state owned enterprises by the former Minister for Public Enterprises, the (currently suspended) Member for Angoram.

The main responsibility of this ministry is the Independent Public Business Corporation, IPBC, which is the sole shareholder of all of the state owned enterprises such as Air Niugini, Telikom, PNG Power, Ports PNG, Eda Ranu and PNG Waterboard, as well as some other businesses in which IPBC has a minority interest, such as bemobile, Bank South Pacific, Oil Search and Kula Palm Oil.

Since August we have been reviewing not only the IPBC but all of the SOEs, to find out why they have been performing poorly and why no dividends have been paid to IPBC by any SOE since 2007.  In essence, where has all the money gone?  Why has the service delivery of SOEs fallen so far below accepted levels?

The Government has appointed a new Board and new Managing Director to the IPBC, and is in the process of renewing the boards of the SOEs and replacing some of their CEOs.  The Department of Public Enterprises has been abolished, as it served no functional purpose; its staff will be redeployed elsewhere in the public service.  And we are still investigating what has happened to the enormous public resources which have been given to the IPBC and the SOEs, but which have not produced rural air services, reliable power, efficient ports, competitive telecommunications or fast and affordable internet services.

It seems that the IPBC and its SOEs were seen as the Somare family “honey pot”, with family members and cronies being appointed to the boards of SOEs and IPBC, and deals being done which make no commercial sense and which have proven to be of little or no benefit to the public.  In the midst of this, the family financial adviser was appointed as Managing Director of IPBC (no conflict of interest was apparently noticed) and even the Somare family legal adviser was given chairmanship of IPBC for a period.  As Minister, Arthur Somare regarded the SOEs as toys to be owned to glorify his image, not to provide services to people.

Sorting out this mess has been a difficult task, though I must say the new Managing Director and staff of IBPC have worked extremely hard and for long hours in the last few months.  I will give some examples of what we have found out in particular SOEs, and what we are doing to rectify the problems.

IPIC Loan

The largest investment decision made by Government ever in PNG was the investment of public money in the PNG LNG project.  This required the borrowing of 1.68 billion Australian dollars which then Minister Somare and the then IPBC Managing Director arranged through the little-known IPIC, a fund in the Middle Eastern oil state of Abu Dhabi.  We have had to investigate the circumstances of this loan, because there is now a 900 million Kina shortfall in the loan which the current Government will have to find.

It is still not clear exactly why this very large shortfall has occurred, but some of the decisions taken in relation to this loan and administration of the funds seem very hard to explain, or were based on bad advice, but they certainly produced disastrous results.  Without going into details, it seems very strange, and an appalling lapse of judgment on the part of Arthur Somare and Glenn Blake, to agree to repay the loan in full in March 2014, before the LNG project starts producing significant revenue.  In other words, we need to repay this very large loan before we have an income stream from the project for which the loan was taken out.  To agree to this was completely stupid, which raises many questions about the motives of the borrowers.

Would it not have been more sensible to take out the loan for a longer period, which would have enabled the loan repayments to have been made after the project was in full production?  And why was the loan money drawn down (and earning little interest) months before it was required for the LNG project?  That issue alone guaranteed there would be a significant shortfall which would have to be made up.   Also, very large foreign exchange losses were incurred when the loan money was all converted to one currency without any currency hedging in place, a normal precaution for such large financial transactions.

All in all, the initial development of this loan, and its administration since being taken out in 2009, have been characterised by very poor decision making which has resulted in a loss to the Government, to the people of Papua New Guinea, of 900 million Kina.  That money could have paid for a lot of schools, hospitals and roads, but is now needed just to repay the loan arranged by Arthur Somare.

MVIL

As an insurance company, MVIL needs significant financial resources available to it to meet claims and other unexpected expenses.  Thus a large part of its business is in arranging appropriate secure investments in which to place its long-term funds.

We would therefore expect MVIL to act professionally and prudently in investing its premium income.  I was most surprised to find, on taking over the ministry, that large sums of MVIL money have in recent years apparently been placed in and through highly questionable investment vehicles, resulting in some of those investments being lost.  In particular, 90 million Kina of MVIL public money had been placed with a dubious investment company operating through a bank in rural New South Wales, in peculiar circumstances.  Approval for that investment was neither sought nor obtained from IPBC.

Our investigations have so far failed to establish whether that 90 million Kina is safe, or reduced in value, or totally lost, other than a vague and unsubstantiated claim from the former MVIL CEO, at the time of his dismissal in September, that [quote] “the investment is safe and still there”.  MVIL has been directed by IPBC to require the Australian investment company to return the whole investment amount to PNG, but we do not yet know whether that will be done.  While I hope for the best, I fear the worst – there is a chance that some or all of 90 million Kina of public money has been lost by MVIL in a crooked Australian investment scheme.

bemobile

This is another example where the previous government, and Arthur Somare in particular, entered into bad deals which have got progressively worse over time. 

In 2008, Telikom sold half of its mobile phone company to a private consortium, dominated by a Hong Kong venture capitalist, GEMS.  But in doing so, Telikom entered into an extraordinarily lopsided agreement for this new joint venture where, notwithstanding Telikom having half the shares, GEMS, with less than 40 per cent of the joint venture shares, was guaranteed a majority of directors and complete control over the management of bemobile (including management selection).  The agreement locked in Telikom to this arrangement with no prospect of changing it.

Earlier this year Telikom’s share of bemobile was transferred to IPBC and the Asian Development Bank became a minor shareholder.  A revised shareholder agreement was signed by the then Managing Director of the IPBC, which is just as lopsided as the original agreement, if not more so, still giving GEMS total management control and permanent domination of the Bemobile board. 

The management of bemobile has been anything but successful.  I must be somewhat circumspect about what I say about bemobile, as a company with private shareholdings (including PNG investors), but it is apparent to anyone that bemobile is struggling to compete with Digicel.  And some of the reasons for this are terrible management decisions taken in the last couple of years by bemobile under GEMS direction.

It is inexplicable why anyone with the interests of the public of PNG in mind would (twice) sign such unfair and biased shareholder agreements, so plainly detrimental to this nation’s interests, as occurred with the former Managing Director of the IPBC, in conjunction with the then Minister.  We are trying to overcome these problems, to improve the management of bemobile and have it managed in PNG rather than from Hong Kong, but it has not been easy and it is not yet resolved. 

Telikom

Telikom PNG is one of the worst performing SOEs.  Its reputation within the telecommunications industry and with the general public is bad, largely as a result of it failing to meet any of its service quality standards for many years.   Under the previous government, the Telikom Board was highly politicised, and this has shown in the way the business has been managed.

In several cases, major capital investment has been made, but not followed through, so that the investment has generated no income nor improved services in any way.  One example is the Lae/Madang link.  Some years ago, Telikom arranged for a second submarine telecommunications cable to be laid to PNG, at considerable capital cost, to come ashore at Madang.  This project was completed in October last year, 2010.  However, that submarine cable has been lying idle for the last year because the international gateway to which the cable needs to be connected is at Lae, and there is no high capacity link between Lae and Madang.  The project to build that link, a relatively minor task, had been waiting around under the previous Government, not attended to, for many months.  In the meantime, the submarine cable has been unused.  In September, the IPBC directed Telikom to complete the Lae/Madang link urgently, and gave Telikom the necessary 6 million Dollars funding for the project.  That will now be completed early next year, so we will finally have an integrated network with an international capacity ten times as great as the current, old submarine cable from Port Moresby.  And Telikom will actually make some money from the new cable.

But Telikom has other major financial and regulatory issues which are not as easy to resolve.  As with all SOEs, Telikom is required, under the IPBC Act, to obtain the Treasurer’s approval, on the recommendation of IPBC, for all expenditure over one million kina.  Telikom and the Telikom Board have blithely ignored that legal obligation, for several years.  In May last year, Telikom wrote to the IPBC, seeking retrospective approval (which cannot legally be granted anyway) for unapproved expenditure by Telikom going back to early 2007, amounting to about 800 million Kina.  This is not a minor accounting oversight; 800 million Kina is a lot of money, a significant slice of the government’s budget, certainly as far as SOEs are concerned. 

This 800 million Kina includes 200 million Kina which Telikom borrowed in 2008 from two banks, as part of a larger proposed borrowing of 340 million Kina, again without any approval from the Treasurer.  Not surprisingly, the banks which lent this money to Telikom are now looking to the IPBC or the Government to repay the money, all of which has been spent.  However, in Telikom’s own words, the 200 million Kina has “not yielded enhanced revenues because the capex programs have not been taken to their logical conclusion”.  In other words, 200 million Kina of borrowed money has been spent, without the required approval, but that investment is not yet producing revenue for Telikom, which now wants IPBC to bail it out.

This just goes to demonstrate the terrible state of financial management in Telikom, which is costing the Government very large amounts of money.  Another legacy of the previous government.

Air Niugini – Flights of Fancy

Air Niugini was forced by the Somare Government to make some very expensive aircraft purchases using public money which made no commercial sense at the time, and which are of little or no benefit to the travelling public. 

The only justification for purchasing the Falcon executive jet in 2010 for well over 40 million US dollars was to satisfy the Somare ego and vanity.  While that aircraft was used as a personal executive jet for the then Prime Minister, his family and friends to go wherever they chose (including frequent private trips to Wewak, Singapore and Australia for family reasons or medical check-ups), the Falcon could only land at a handful of airports in PNG and was thus of little or no use for any flights, scheduled or charter, other than for satisfying the whims of the then Prime Minister and his entourage.

Air Niugini is now selling the Falcon jet, on the Government’s instructions.  While we will make a loss on the sale, Air Niugini will save the very considerable crewing and servicing costs for the Falcon which are mounting up on a daily basis and we will get a significant amount of the capital cost back for the Government.  While awaiting sale, the Falcon has had some use, being chartered for the Prime Minister on official travel, for which the government is paying Air Niugini proper charter rates.

Another bilas purchase forced on Air Niugini by Arthur Somare was to buy a Boeing 787 Dreamliner – the most expensive aircraft in the world at 140 US million dollars apiece – and to get the earliest possible delivery.  It was to be delivered next year, but manufacturing delays have put that back to 2014.  It makes poor commercial sense to have a 787 in the Air Niugini fleet in 2014, so the airline is now negotiating with Boeing to delay delivery for at least a couple of years, by which time it will make commercial sense.

While Arthur Somare dreamt of – and used people’s money to buy - Falcon jets and Dreamliners, what did he do in nine years to extend Air Niugini services to rural areas?  Nil, nothing.

Finally, Air Niugini was told by the Government to continue its unprofitable Japan services, in return for which it was promised a subsidy from the Government.  A subsidy payment of thirty million kina, intended for Air Niugini, was instead paid to the Department of National Planning, from which it promptly disappeared.  Air Niugini is still waiting for payment.  We are trying to find out what happened to the money, but have so far had no explanation.  The Member for Pomio, Paul Tiensten was of course Minister for National Planning at the time.  Perhaps Air Niugini’s money was diverted to his pet private airline, Travel Air, or its owner?

PNG Power

Like its sister SOEs, PNG Power is paralysed by lack of capital.  It is literally stumbling in the dark, intermittent power being provided thanks to the ingenuity and skills of its linesmen and technicians.

PNG Power requires major surgery and a major capital injection.  Cabinet has a number of submissions before it which, when implemented, will transform the electricity industry of our country and introduce partners to PNG Power to assist in power generation.  These projects will greatly increase capacity and provide solutions for the energy requirements of Port Moresby, Lae, Morobe, Madang, Western and all the Highlands provinces, as well as provide a base for the export of power and for huge industrial expansion from the power to be generated by a hydro scheme on the Purari River.  Taken together, these projects will solve the country’s power problems for scores of years ahead, and PNG Power will be an active participant in this bright future.

PNG Ports

The two major ports in the country, Lae and Port Moresby, are really struggling.  The lack of capacity of both ports is resulting in delays in moving cargo and high costs, which are in turn being passed on to the general public in the cost of goods in supermarkets and stores.  Port Moresby desperately needs a new port, out of the central downtown area.  And while a new port is planned for Lae, the project is frankly a mess.  It has design issues, and already there has been a 100 per cent increase in the capital cost of the project.  Lae port handles 60 per cent of the export and import trade of the country, and generates 50 per cent of all port revenue.  The current port has huge capacity problems, and is not only inflating the cost structure in Morobe and the Highlands, but causing great headaches for the construction of the LNG project and other major mining projects served by Lae for cargo – not helped by the dreadful state of the Highlands Highway.

IPBC is grappling with these problems with our major ports, and is determined to provide solutions.  

Conclusion

Mr Speaker, the picture I have painted of the major SOEs looks depressing, and unfortunately it is.  The examples I have given demonstrate one main thing – the politicisation of the SOEs and the IPBC under the previous government has led to poor management, poor governance, a lack of commercial understanding and, as a result, poor performance from the SOEs in terms of the services they deliver to the public of PNG, and their poor financial and commercial performance.

It has been an enormous task to try to come to grips with what is occurring in each of the SOEs and then trying to fix the problems, turn the SOEs around commercially and financially, and improve their quality of service to their customers.  And in the midst of it, trying to find where a lot of the money has gone.  We are still working on it, and will continue to do so in the coming months.  It will take time to overcome the years of mismanagement and neglect of SOEs and their politicisation under the Somare government, but it must be done; the SOEs are too important to the daily lives of all our people to let them stay so unhealthy.

Department of Public Enterprises abolished

Minister for Public Enterprises, Sir Mekere Morauta, today announced that the O’Neill-Namah Government had abolished the Department of Public Enterprises.

He said the decision, approved by National Executive Council, was to reduce waste and inefficiency.

“The Department has a recurrent budget of K4 million a year and a development budget of K5 million,” he said.

“Yet there is no evidence of any constructive policy input from the Department to myself as Minister, or the previous Minister.

“It was created by the former Government with an establishment of 61 positions and personal emoluments of K3.5 million. "Yet it has only a Secretary and 18 staff.”

Sir Mekere said the redeployment of the 18 staff within the Public Service, without loss of service or employment rights and to avoid costly retrenchment, was being considered.

The policy and advice functions of the department will revert to Treasury and IPBC.

“IPBC was never set up to be a policy-making institution like Treasury, Planning, or Attorney-General’s,” Sir Mekere said. “Nor is it a co-ordinating department.

“Its job is simply to manage and repair Public Enterprises under its control. That is its core function.

“When we need policy input, we will consult the relevant departments.”

Government needs K900 million to cover shortfall in LNG project

Minister for Public Enterprises, Sir Mekere Morauta, announced today that NEC had approved a submission to raise up to K900 million to cover a shortfall in Papua New Guinea’s funding of its share in the LNG project.

“The shortfall has arisen because of decisions by the previous Government and previous IPBC management when they borrowed $A1.68 billion for our share,” he said.

“The first was to borrow in Australian dollars when the LNG project equity required payment in US dollars, and the second was the bulk conversion of the Australian dollars into US dollars.

“If we do not raise the extra money, we risk having to sell some of our 19.4 per cent share of the project at less than market value, and suffer lower revenue streams when the project begins producing gas.

“It is essential for PNG to meet its financial commitments to the project. It is an opportunity of a lifetime, and we need to grasp it with both hands.

“If we as a nation are to reap the full benefits, then we must make sure we are able to pay for the State’s full 16.6 per cent direct interest and the 2.8 per cent direct interest being bought on behalf of landowners.

“That is what the K900 million will be used for, plus some potential contingencies such as exchange rate movements.”

Sir Mekere, who as former Opposition Leader questioned the way the original $A1.68 billion was borrowed from Abu Dhabi by the former Government and management of IPBC, said his warnings about dangers and irregularities had proved to be right.

Treasury was completely shut out of the loan negotiations, he said, and this was a major cause of the problems that arose, and the need to borrow a further K900 million.

The former Minister and the former IPBC management were not competent to arrange the loan, and they were not competent to arrange the conversion into Australian dollars.

“In the end, their confusion and lack of financial expertise has cost every Papua New Guinean K136 each,” he said.

A strategic review of the loan had revealed the shortfall and other issues with the loan. Further inquiries are continuing.

The K900 million will be raised relatively quickly on the domestic market, starting next month. Studies have shown that there is excess liquidity in the economy and that potential investors are available.

Despite knowing of the shortfall for a number of years, former IPBC management did nothing about it. The extra money is being raised now in readiness for project cash calls early next year.

The 2012 Appropriation Act of Parliament (2012 Budget) will authorise the raising of the K900 million.

United Nations warns of virus attack on cassava in PNG

By THOMAS HUKAHU

UNITED Nations scientists are warning that a virus is attacking the cassava plant, a staple food in Papua New Guinea which is also gaining commercial momentum in the eastern coastal region of Central province, The National reports.
The virus is currently rampant in parts of Africa where it is nearing an epidemic but in PNG authorities have indicate that they were aware of its spread there and were taking measures to prevent its introduction to PNG.
It is known as the cassava brown streak disease (CBSD).
Cassava is one of the world’s most-important crops providing up to a third of the calorie intake for many people not only in Africa but also in PNG because it does well on poor soils with low rainfall.
According to BBC World Service last week, the Food and Agriculture Organisation (FAO) of the UN said the African situation was urgent and was calling for an increase in funding for surveillance.
CBSD shows up late in the production cycle as when harvesting.
Farmers may think their affected crop is healthy only to find when the tuber is harvested that the crop is bad.
The symptoms can be recognised on leaves, stem and storage roots of cassava plants.
On leaves it appears to as patches of yellow areas mixed with normal green colour.
The yellow patches are more prominent on mature leaves than on young leaves. The damage leaves do not become distorted in shape.
On the stems, the disease appears as dark brown streaks with dead spots on leaf scars.
These streaks are most prominent on upper, green portions of the stems.
The disease plants may show shoot tip die-back.
Cassava brown streak distorts the shape of the storage roots and may cause cracks and discolourisation in the storage roots.
An officer with Changhae Tapioka (PNG) Ltd, the South Korean firm initiating a multi-million kina cassava bio-fuel project in Central, said this week they were aware of CBSD.
He said the most common way this disease was spread was by planting of stem cuttings from diseased plants.
The virus is also believed to be spread by insects.
 It is not known to have attacked other crops.
The disease can be managed by controlling planting materials in a well-kept nursery thereby increasing high chance of healthy planting material.
Another method is to use integrated pest management practices which include site selection, soil improvement practices, selection of appropriate varieties and planting materials.
The best practice to manage the spread of disease is to burn all infected crops. Chemicals and pesticides can be used but in large quantity they can affect the surrounding environment.
The officers said, not all hybrids are effective as control measures and more research is needed in this area.
In preventing cassava viruses reaching PNG, strict quarantine measures must be taken.
The National Agriculture Quarantine Inspection Authority (NAQIA) is responsible for all imported plant materials.
The National Agriculture Research Institute (NARI) is responsible for all research into plants diseases in PNG.
These are important institutions in PNG, including Department of Environment and Conservation, which are responsible for enforcing good management practices of developers.
The officer said that at the Changhae Tapioka (PNG) Ltd cassava plantation, pest and disease spread was managed mainly through application of chemical, biological and burning.
Imported varieties from Indonesia are monitored closely for first signs of disease and pest.
He said all imported varieties of cassava were to produce high starch content as compared to our local varieties.
All imported varieties are restricted to the plantation and are not for distribution to locals.
The company wishes to only promote local varieties through its out-growers programme.
There are nine varieties of cassava, the local varieties, as well as the imported.
The company has been working closely with NAQIA and NARI for its agro-business in PNG.
In the future the company will look into developing and exploiting virus resistance and effective methods of phytosanitation (removing infected or infested plants).
The common diseases of cassava are cassava mosaic disease, cassava bacterial blight, cassava anthracnose disease, cassava bud necrosis, and root rots.
Some of these disease attacked leaves and steams of cassava plants while others attacked the storage roots.
Common leaf and stem diseases include cassava mosaic disease, cassava bacterial blight.
Cassava anthracnose disease, cassava bud necrosis and brown steak disease affect the storage roots.
According to BBC, the FAO found that none of the varieties of cassava being distributed to farmers in Africa appeared to be resistant to the CBSD virus.
FAO said that like many crops it was threatened by a number of pests and diseases that hindered its production. Viral infections have periodically wiped out the crop in some regions leading to famine, it added.
The scientists said CBSD was on the verge of becoming an epidemic. It first appeared in Uganda in 2006 but in the past few months had been found in Burundi and the Democratic Republic of Congo for the first time, BBC reported.
The FAO scientists say they are in a race against time with this particular strain of virus. They are calling for a rapid increase in funding to improve surveillance. They also want to improve training for farmers and they want to ban the distribution of infected plants between districts.
Some eight varieties of the crop are under development by the International Institute of Tropical Agriculture which show some level of resistance to CBSD.
It is hoped that these varieties could be made widely available within two years.

Grade 8 duo sentenced to 22 years

By JAYNE SAFIHAO
TWO Gader 8 male students have been sentenced to 14 years and eight years in jail respectively for their part in the murder of another teenager in Ramu last year, The National reports.
The court heard that on Jan 6, 2010, at the Ramu Sugar compound, Melchior Poto, 18, who was a close friend of the two, had been drinking with another friend.
FSD, the first juvenile as referred to by judge David Cannings, met the two, and claimed Poto said some insulting words to him.
Feeling offended, FSD left and reported it to his pal. The pair then conspired to attack Poto.
They staged a surprise attack on Poto and his friend.
The court heard that a kitchen knife was used to stab Poto in the ribs.
The 15cm deep wound had reportedly led to Poto’s death.
Cannings took into account that:

• lK12,800 had been paid to Poto’s family as compensation;
• Both their fathers had lost their jobs in Ramu after the incident;
•  Both were going to continue to Grade 8 when the incident happened and;
• No more money had been demanded as compensation after the bel kol mo­ney.

He said justice had to be served on the pair.

New judge to hear NA party leadership vow

By JULA DAIA BORE
THE National Alliance party’s leadership dispute which came before Justice Royale Thompson at the Waigani National Court will be heard by another judge next Wednesday, The National reports.
Thompson, who will be taking her annual leave soon, directed the lawyers to confirm next Tuesday at the court registry which judge would be hearing the matter and where and when the matter would be heard.
The matter is between Treasury and Finance Minister Don Polye and NA party president Simon Kaiwi with the NA executives.
Polye is seeking to stop his suspension as announced in the media by Kaiwi recently.
Kandep MP Polye who heads the NA’s highlands bloc, seeks the court to stop the party’s national executives directive to suspend him as a member and leader of the NA party.
Polye is also seeking to stop the suspension of the other NA members who are now within the current government, stating that Kaiwi had suspended them all from the NA membership.
Polye is also seeking the recognition by the court of his overall NA party leadership appointment which would effectively remove the position from Sir Michael Somare who is the original founder and party leader.

Nape may lift Tiensten’s ban

By ISAAC NICHOLAS

SPEAKER Jeffery Nape is expected to rescind his decision to disqualify Paul Tiensten as member for Pomio, according to Sir Arnold Amet, The National reports.
It followed talks yesterday between members of the former government led by Madang Regional MP Sir Arnold, Prime Minister Peter O’Neill, Speaker Nape and Leader of Government Business Moses Mala­dina to have the decision reversed.
Sir Arnold later explained that there had been consultation between O’Neill and Nape over the decision and the Clerk of Parliament was now checking the attendance records.
Sir Arnold said he hoped the issue would be resolved amicably to avoid resorting to court action.
“On Tuesday, our esteemed speaker purported to exercise powers he did not have to disqualify the member for Pomio. The matter is absolutely sub-judice,” Sir Arnold said.
“We are pleased to say that since yesterday (Tuesday) we explained and Tiensten explained and a proposition was put to the speaker’s office.
“We had formal discussions with the speaker and prime minister and this issue can be resolved amicably.
“It is a positive outcome we are pleased with. We do not want to go to court.”
Tiensten who was in the parliamentary chambers but left before the session, told The National that he did not want any confrontation with the speaker.
He said his presence could force the Speaker to adjourn parliament which would affect the tabling of important bills such as the declaration of Hela and Jiwaka as provinces and the Women’s Bill
“I left because I did not want any confrontation again.
“I was mandated by the people of Pomio and the speaker has no right to disqualify me so I leave it to him to rescind his decision to disqualify me,’’ he said.
Sir Arnold said the records showed that Tiensten only missed two meetings of parliament and not three to warrant his disqualification.
He said they had urged Tiensten to take two days off and return when the speaker rescinded his decision.

Missing K96 million found in Australian bank

ALMOST K100 million owned by a state-owned enterprise has been siphoned off to a bank account in the Australian state of New South Wales and a police investigation is underway to recover the money, The National reports.
Former public enterprises minister Arthur Somare and former Motor Vehicle Insurance Ltd (MVIL) manager director Dr John Mua are implicated.
The money – about K96 million – was the proceeds of the sale of 530,105,100 shares in Bank South Pacific which were owned by MVIL.
Public Enterprises Minister Sir Mekere Morauta announced details yesterday, saying he had ordered the recovery of the money.
“The sale, to an Australian company called Nominees Niugini Ltd, is now the subject of a police investigation.”
He said MVIL sold the shares when under the control of his predecessor Arthur Somare and the former Independent Public Business Corporation (IPBC) management.
According to Sir Mekere, proper processes had not been followed, and the sale was in breach of Section 45B of the IPBC Act and Section 110 of the Companies Act.
The sale was not approved by the IPBC board, as required, and there was no shareholders’ resolution approving the sale, as required, he added.
The new IPBC board has instructed MVIL to rescind the sale contract, called an equity monetisation contract agreement while starting legal proceedings against MVIL and Nominees Niugini.
“The money is being held in an account owned by a company called Woodlawn Capital, at the Commonwealth Bank in Lismore, New South Wales,” Sir Mekere said while calling on Mua to help recover the money.
“Dr Mua would save the nation a lot of money by assisting us in the recovery of the K96 million and its return to IPBC.
“For the nation to recover the money through court proceedings would be expensive and time-consuming. I would like Dr Mua to help us avoid this.”
Sir Mekere said this when announcing NEC’s endorsement of changes to the MVIL board, adding that no Public Enterprise chairman would be an executive chairman

Hela, Jiwaka get nod

By ISAAC NICHOLAS

HELA and Jiwaka will be our newest provinces following yesterday’s parliament acceptance of the Boundaries Commission report, The National reports.
They take the number of provinces to 21 and the National Capital District and it also meant an additional two seats in parliament.
The new provinces will elect their own governors in the gene­ral election next year.
Parliament unanimously voted 73-0 to accept the declaration of Hela and Jiwaka as new provinces after Jimi MP Wake Goi, the Minister Assisting the Prime Minister on Constitutional Matters, tabled the commission’s report and recommendations in parliament.
Last year, parliament proposed the Hela and Jiwaka provinces by varying the boundaries of Southern Highlands and Western Highlands respectively.
Goi said the people of Hela and Jiwaka were expected to elect their own provincial and open electorate representatives in the 2012 election.
“The people of Hela and Jiwaka have openly expressed views in favour of them going into the 2012 general election as separate provinces from Southern Highlands and Western Highlands,” he said.
Goi said the current boundaries would remain within the limits as determined by law in 1977 until 2013 when a nationwide review would be carried out.
Hela will comprise Tari-Pori, Koroba-Lake Kopiago and Komo-Margarima.
Jiwaka will have North Waghi, Anglimp-South Waghi and Jimi.
Goi said there was a desire by some electorates and provinces to change their current electoral boundaries based on ethnic, cultural and traditional affiliations.
“In general, many communities sharing common provincial and/or open electorate boundaries continue to be critical of their apparent lack of recognition both by provinces and electorates they legally are in and those they claim to be getting services from,” he said.
“These issues, however, will be addressed in 2012 when the boundaries commission conducts a nation-wide review to redistribute all electorates in PNG and report to parliament on its recommendations.”
Tari-Pori MP James Marape thanked everyone on behalf of the 300,000 people of Hela for making his people’s dream come true.
Marape singled out Grand Chief Sir Michael Somare and the former government and Prime Minister Peter O’Neill and his government for making the Hela dream come true.
“As chairman of Hela Transitional Authority, the Hela MPs and the 300,000 people say thank you to everyone who gave the necessary support to pass the final hurdle,” Marape said.

NARI hosts rice stakeholders' workshop

ByJOSEPHINE YAGA of NARI

Rice development efforts in Papua New Guinea have received on- and -off attention in recent years. Attempts have been uncoordinated and therefore lack organised information, co-ordination, well-researched policy and strategy for rice development in PNG.

 Participants listen attentively to NARI director general Dr Ragunath Ghodake’s opening remarks

Different departments, institutions and organisations work in isolation of each other and lake proper and coordinated partnership and collaboration.
There is a need to get realistic and well-shared understanding of various constrains, opportunities and arising issues in rice research and development so that this issues can be address.
To identity the constrains and potential rice development opportunities, a two-day rice stakeholder workshop was hosted this week by the National Agricultural Research Institute (NARI) at its Momase Regional Centre in Lae, engaging key players in the area of rice research, policy and development to share their experiences, achievements and understanding of their roles and responsibilities.
The workshop was designed to meet the following objectives:
• To assess and understand rice research and development programmes and activities implemented and undertaken by different stakeholders, including progressive rice farmers;

• To identify and prioritise their different constrains and opportunities and emanating issues in rice research and development in PNG;

• To review and decide on key aspects to be covered by rice production survey and development implementation plan; and

• To explore opportunities for partnership and collaboration between stakeholder and agree on modalities of collaboration for rice research and development..

The participants included representatives from the national and provincial agriculture, Organisation for Industrial, Spiritual and Cultural Advancement ( OISCA), Christian Leaders Training College (CLTC), Community Development Initiative-Kutubu, Japan International Cooperation Agency, ROC Taiwan, PNG Women in Agriculture Development Foundation (PNGWiADF), Territory Packaging, National Voluntary Service (NVS) – Erap, NARI and rice farmers.

Rice stakeholders during the rice stakeholders’ workshop host by NARI at the NARI Momase Regional Centre in Bubia, Morobe.

The two-day workshop started on Tuesday and ended yesterday.

Cabinet makes changes to MVIL board

Minister for Public Enterprises, Sir Mekere Morauta, said National Executive Council had endorsed changes to the board of Motor Vehicle Insurance Ltd ( MVIL).
The new members are Mr Bonny Igime, Mr Steven Pim, Ms Veronica Waieng, Dr Bangi Kumdim and Mr John Tuka.
In announcing the appointments, Sir Mekere stressed that no Public Enterprise chairman would be an executive chairman.
“Reports that executive chairmen have been appointed are wrong," he said.
“These new appointments are part of the O’Neill-Namah Government’s reforms of IPBC and its Public Enterprises, and I look forward to working with them.
“One of the new board’s first jobs will be to recover about K96 million missing from MVIL.”
Sir Mekere said the money was the proceeds of the sale of 530,105,100 shares in Bank South Pacific which were owned by MVIL.
The sale, to an Australian company called Nominees Niugini Limited, is now the subject of a police investigation.
MVIL sold the shares when under the control of the former Minister for Public Enterprises, Arthur Somare, and the former IPBC management.
Proper processes had not been followed, and the sale is in breach of Section 45B of the IPBC Act and Section 110 of the Companies Act.
The sale was not approved by the IPBC board, as required, and there was no shareholders’ resolution approving the sale, as required.
The new IPBC board has instructed MVIL to rescind the sale contract, called an Equity Monetisation Contract Agreement. IPBC has begun legal proceedings against MVIL and Nominees Niugini.
The money is being held in an account owned by a company called Woodlawn Capital, at the Commonwealth Bank in Lismore, New South Wales.
Sir Mekere today called on the former managing director of MVIL, Dr John Mua, to help recover the money.
“Dr Mua would save the nation a lot of money by assisting us in the recovery of the K96 million and its return to IPBC.
“For the nation to recover the money through court proceedings would be expensive and time-consuming. I would like Dr Mua to help us avoid this.”

Sir Mekere Morauta answers questions on National Petroleum Company

Minister for Public Enterprises, Sir Mekere Morauta, said today the O’Neill-Namah Government’s decision to restructure the National Petroleum Company (NPCP) had been made in the national interest.
“A number of questions have been asked about NEC’s decision, and I am happy to respond to them,” he said.
“The first thing to say is that there has been no change of ownership of the shares in the LNG project belonging to the State and to the landowners.
“They remain held in trust within IPBC by NPCP (formerly Kroton) on behalf of the State and the landowners.
“All that has been changed is the management structure of NPCP/Kroton, to make it simpler, more efficient and ultimately cheaper for the State and landowners.
“That will clearly benefit both the State and landowners.”

Questions to the Minister for State Enterprise :

1. Why has he decided to have a Shell Company when it needs to function like a Joint Venture Partner in what is the largest investment that PNG has ever made?

The purpose of IPBC, including NPCP/Kroton, is only to hold state assets. It is not an operating company. All it does is distribute the dividends from the equity – to the State and to the landowners.

If the landowners want to enter into a joint venture they can do so through Petromin, or MRDC or a private company.

2. How will the shell company manage cash calls, monitor the Project progress, do the analysis of various legal, commercial and technical complexities of the Project during the construction and into production phases of the Project?

IPBC will employ the best technical team to manage cash calls, monitor the project and analyse the legal, commercial and technical complexities. The technical team will continue to attend joint-venture meetings, along with expert DPE staff. Cash calls are currently paid by IPBC and this will continue.

3. Are we just going to be watching and accepting what foreign companies tell us on the various aspects of the projects or we will develop our own skills in oil and gas?

As above. Also, it is not the best use of human resources to have expert staff spread across NPCP/Kroton, Petromin, DPE and MRDC.

4. What happens to the Landowners 25.75% equity in the Kroton equity?

Nothing happens to the landowners’ equity. It remains with the NPCP/Kroton shell company.

Under this decision, we have cut out the middle-man between IPBC and landowners. Landowners will not have huge fees deducted from their dividends by NPCP/Kroton.

For example, for next year NPCP/Kroton has demanded a budget of K75 million. Landowners would have had to pay their share of this.

5. Why has IBPC or the State Enterprise Minister not consulted us Landowners? It makes us wonder whether there was wider consultation amongst the other Ministers and whether it was endorsed by the Prime Minister?

The decision was necessary under the planned legislation for the Sovereign Wealth Fund. The SWF NEC submission was jointly sponsored by the Prime Minister, along with myself and the Treasurer. The Prime Minister approved the decision to restructure NPCP/Kroton. All other Cabinet Ministers were consulted on the decision at NEC.

6. Was this decision done in consultation with the other State agencies like DPE, the developer of the LNG Project etc ?

The submission was jointly sponsored by the Minister for Public Enterprises and the Minister for Petroleum and Energy. Treasury was also consulted. DPE has been consulted about taking over NPCP’s community affairs staff. The decision to restructure NPCP/Kroton will also help reduce the industry confusion surrounding the creation and operations and responsibilities of NPCP/Kroton, Petromin and the proposed Petroleum Resources Authority. This makes things simpler, more efficient and less expensive for everyone.

7. In light of national interests, we wonder who IPBC and Sir Mekere’s advisers are. Certainly this decision as reported by the Minister for State Enterprises does not look into the big picture in terms of PNG’s national interest.

I am advised by IPBC, Government departments and institutions and independent consultants. I consult the Prime Minister and other Ministers. I always act in the national interest and in this case in the interest of landowners. Consolidating the vehicles used for PNG participation in resource projects means that we can use PNG skills and financial resources more efficiently to get a better deal for all Papua New Guineans. That is what the national interest is all about.

8. Why is the current draft Organic law on Sovereign Wealth Fund (SWF) silent on a nominated or designated state entity as the vehicle for managing the state’s interests in PNG LNG Project? Are the current media statements by Sir Mekere and IPBC deliberating endorsing the demise of NPCP (Kroton)? Notwithstanding the current SWF draft legislation, we landowners are interested to know the link between the nominated state entity, the development funds and our share of Kroton equity.

The Organic Law is about the management of revenue. It is not about the management of equity. The nominated entity under the IPBC Act and the LNG Project Loan Agreement is NPCP/Kroton. The loan Agreement is a binding legal agreement signed by the former Somare Government and may not be changed. The equity and the landowners’ equity remain exactly where it has always been, and managed by the people it has always been managed by. NPCP/Kroton has been restructured because it was wasting state money and landowner money by duplicating activities that could be carried out by others, for example DPE and Petromin.


Mekere Morauta KCMG MP


Minister for Public Enterprises

Bart Philemon in Parliament today on the 22 reserved seats for women

Mr. Speaker.

1.0 Introduction & Setting the context

Let me be very clear. I DO NOT have any problems at all about Women in political leadership. In fact, there are many very capable women who can provide better political leadership than man. So I am NOT in this debate to argue whether a male or a female can lead better.

I stand today as a National Leader. And I make my remarks consistent with my role as a former Treasurer for four years and as an Opposition spokesman on Budget and Finances for four years.

Mr. Speaker.

I think this is the most consequential act of law making since our independence and this will now go down in our political history books.

We have now legislated to allow women to enter Parliament as legislators without going through the normal electoral process.

Mr. Speaker.

I personally have no problem in giving fair representation to our women population. They are important partners to work along with in pursuing our development goals as enshrined in our constitution.

Because of women, we are all here today. Women are an inseparable part of community life and our family life. They share our lives as mothers, wives, daughters, nieces and friends.

Mr. Speaker.

I consider women as a most important part of the society, for me it is the sign of modesty and respect in the society.

There are women who make the fate of societies. They are the reason of the success of every successful man, because they are the one who gives the moral support and listen to their son, brother, husband and father when no one listen and support them. So they don’t deserve to be looked as a thing of time pass or a tissue paper whose fate is to get used and thrown away.

Mr Speaker.

My issue on debating this bill is about the right use of public money in our nation – at this crucial time.

We must, as responsible leaders, act responsibly to ensure that the priority needs of Papua New Guinea and the 6.7 million people are addressed.

I want to ask this Parliament to lay aside in your mind the potentially emotive equality in gender debate. And I want you to focus on the facts and figures together with the issues I must raise.

I want to highlight the cost of governance and measure this against this bill to add 22 reserved seats for women which in total would add at 24 seats to this National Parliament Chamber with the two regional seats for Hela and Jiwaka Provinces.

2.0 The Parliament & Cabinet as envisioned by CPC fathers


Mr Speaker.

Let me remind this honourable House what our constitutional founding fathers said about our role. In chapter 3, clause 4 of the CPC Report while addressing the reasoning behind The LEADERSHIP CODE, our constitutional founding fathers envisioned, and I quote:

In his public office, a leader’s first responsibility is to the people he or she represents or on whose behalf he is working. This responsibility must override self interest. A leader’s first loyalty must be to his office, not to himself. Such priority of loyalties might in fact mean some personal loss of opportunity or benefit, but this personal and official responsibility of a leader is assumed when he takes office, and it continues throughout his entire tenure of office. END OF QUOTE.

Mr Speaker.

If we, as elected leaders by virtue of this Constitution, are to be faithful to our mandate, we must take note of the thoughts of these founding fathers on leadership and decision-making.

The Constitution and subordinate legislations as they framed allowed for 109 MPs and a maximum of 27 Cabinet Ministers.

Because of the early Bougainville secession movement, the Provincial Government system was introduced. Then we added 12 Vice Ministries.

We have now added five additional ministries to bring this to 33 ministries altogether.

SO now we have the following:

• 33 Cabinet Ministries

• 12 Permanent Secretaries or Vice Ministers

• 19 Permanent Parliamentary Committees

• 14 Parliamentary Referral Committees

Mr Speaker, add all the costs of the provincial government system, the district administrations and all the Government Departments and statutory bodies, our country has a very high public sector bill.

3.0 Huge Cost of Public Sector

Wages alone account for over K2.55 billion for some 77,000 public servants, 109 MPs and 584 political staff.

Year after year since I became a Member for Parliament – particularly since I had anything to do with PNG’s finances, I have raised concern about this public sector bills.

With the five new additional Cabinet Ministries introduced, figures from the SRC Determinations, indicate that some K21,492,781 is needed annually to cover the salary, allowances and staff salaries of the Executive Council Members alone. An additional K3 million needed to be found to pay for the additional 5 new ministries.

Mr Speaker.

I see no justification for the increase in Cabinet Ministries. I see no justification for the 12 Vice Ministers. Were all Ministers (before the additional five) overloaded with work? Instead of the usual eight hours a day, were the Ministers working 12 hours to 16 hours per day?

In truth, there was been no research to determine this. And then 12 Vice Ministers were added. What actually do these 12 Honourable Members do for the extra perks and privileges? The public hardly hear or see them at work. This floor has yet to hear a vice ministerial statement, or even a ministerial statement that acknowledges vice ministers’ contribution on the floor of Parliament.

If a leader’s first responsibility and loyalty is to the people and to the office, would any leader at all in clear conscience voted for the additional five Cabinet positions? Would a Prime Minister, from that perspective, allowed for 12 Vice Ministers to be appointed? The answer should be a resounding NO. But instead, in PNG, it has been YES.

Mr. Speaker.

And now we want to add two more regional seats and 22 more reserved seats for women to this Parliament!

4.0 Report of the Public Sector Rightsizing Working Group


Mr Speaker.

In September 2004, the National Executive Council chaired by then Prime Minister Sir Michael Somare in NEC Decision 143/2004 approved the establishment of the Public Sector Rightsizing Working Group. Their job was to provide the NEC with an appropriate policy, strategy and plan of action for an overall review and restructuring of government administration to achieve the government’s fiscal objectives for a reduction and rationalization of budget expenditure.

The report of this Public Sector Working Group was concluded in September 2006 and handed over to the Prime Minister shortly after.

This Rightsizing Report done by academics and hands-on experts. This report, on issues directly related to cost of governance, highlights the following:

(And this is a direct quotation) There are 27 Ministries at the moment in PNG, one Minister for about every 190,000 people. This is much higher than in other developing countries. The world average is around 16. National Parliament Ministers in PNG typically receive an annual salary of around K80, 000 (representing a total base salary cost to National Parliament of K2 million). This cost is compounded by the excessive level of support provided to this largest number of ministers. There are over 500 ministerial support staff servicing 27 Ministers – over 10 staff on average per Minister. For example, direct ministerial support services received K13 million in 2005. Involvement by the backbench in the process of government is limited; committee processes are not used effectively.

Mr Speaker.

The report examined the types of introduced reforms into Cabinet and examined PNG’s peculiarity, and recommended that there be: (And I QUOTE)

a reduction in the number of Ministers to between 15 and 20 (with departments grouped into portfolios). ADB reported the world average to be 16. Developing nations in Africa, Latin America, Asia and the Pacific had considerable variation. PNG’s current 27 Cabinet Ministers is large in comparison with many developing countries. (END OF QUOTE).

The report, done by PNG’s own sons, recommended:

A number of vice ministers in charge of various portfolio agencies with an overall Portfolio Minister

Reducing 24 departments to 18 portfolio departments.

In short, this report compiled by experts in various fields recommended re-organisation to reduce costs - not additional new ministries. We want to reduce the cost of governance – and increase the delivery of goods and services.

5.0 Analysising cost of governance and delivery of goods and services

Mr. Speaker.

I ask myself: will the additional seats increase the delivery of goods and services?

The same report highlights how savings in cutting down of number of ministries and number of Government Departments would have savings as follows:

For every K3 million, the State can:

• Engage 198 more policemen to address the law and order problems per year

• Educate 10,200 pre school students for a year

• Purchase medical supplies for vaccines for 10,200 young children per year

• Re-seal (single coat) 30 kilometres of road per year

Will 22 reserved seats for women increase delivery of goods and services?

Let me now focus specifically on this bill to allow for 22 reserved seats for women.

Mr Speaker, it is estimated that each seat will cost taxpayers about K500, 000 so we are talking about K11 million addition to the cost of governance.

Papua New Guinea is no where near to achieving the Millennium Development Goals. These goals and our human development indicators show that:

1. Up to five women die daily while giving birth;

2. Up to 15,000 out of every 100,000 children born will die as infants or within the first five years of their young life. Half of those will be female infants or children;

3. PNG is still struggling to balance gender equality in enrolments and retentions.

4. HIV/AIDS continues to create havoc especially among our young people – half of whom are female and who are the most vulnerable.

Mr Speaker.

This the only report which recommends cutting cost of governance. The 22 reserved seats for women will no doubt raise the scale a little in gender equality.

But I am faced with this mathematics: With just K9 million out of the K11 million for the proposed additional reserved seats for women, the State can:

• Engage 594 more policemen to address the law and order problems per year which will keep our womenfolk and girls safer

• Educate 30,600 pre school students for a year which will educate 15,300 female pupils

• Purchase medical supplies for vaccines for 30,600 young children per year which will save the life of 15,300 female children from early death and give them a chance at life.

• Re-seal (single coat) 90 kilometres of road per year allowing access for travellers of which 50 per cent are likely to be females.

6.0 Conclusion

Mr Speaker.

This bill boils down to this question:

Does gender equality in political leadership addresses the current development priority needs of Papua New Guinea?

In other words, does the cost of having 22 reserved seats in parliament addresses poverty eradication, better education, improved health, add more infrastructure, roll out more utilities to the majority of our 6.7 million people.

The answer, Mr Speaker, is NOBODY CAN TELL US. NOBODY KNOWS.

Faced with an obscure attempt to address our development woes by allowing for gender equality in political leadership, and faced with immediate human development indicators that ought to highlight immediate funding priorities, Mr Speaker, I have decided, consistent with my stance on reducing the cost of governance and public sector, NOT to support this bill.

I therefore do not support this bill because it adds to the cost of governance without showing it will improve delivery of goods and services to the masses.

Thank you.

BART PHILEMON

Women's bill passed

Parliament has just passed the bill for reserved seats for women - the Womens Equality and Participation Bill - by 72 votes to 2.

Western Province Governor Bob Danaya and Lae MP Bart Philemon opposed it