Focusing on reading in Papua New Guinea

Improving how reading is taught and learned

December 23, 2014

by Jeff Ramin 

Global Partnership for Education

                

Papua New Guinea is making great strides in improving how students are being taught to read.

This is good success considering that in 2011 literacy rates among primary and secondary students in five of Papua New Guinea’s 22 provinces were below 20% (ASPBAE Australia).

 

Two girls sitting at a desk in Papua New Guinea.Picture: Jeff Ramin

The Pacific Island nation of 7.3 million people joined the GPE in 2010, with an ambitious Universal Basic Education Plan designed to ensure that “all children of school age must enroll in school, complete nine years of basic education and should have learnt skills, knowledge, and values covered in the basic education curriculum”.
The plan aims to improve access and the quality of education as well as enhance management of basic education, retention, and equity.
 The Global Partnership for Education supported Papua New Guinea with a $19.2 million grant to implement this plan.

Reading is a fundamental skill to promote learning

The 2011 PNG Read program, funded by the GPE grant and implemented by the Papua New Guinea Department of Education with the support of the World Bank, is an innovative program founded on the principle that reading is the fundamental skill all children must acquire to promote learning.
The program promotes better teaching and learning of reading skills in elementary and primary education.
In Papa New Guinea, elementary level means preschool and the first two years of primary school, and elementary level includes grades 3 to 8.
The program consists of three basic interventions:

• Classroom libraries and related support for grades 3 to 8;
• Learning kits and materials for elementary grades, also to teach reading;
• Introducing a reading assessment tool to enable teachers to measure student progress

Many challenges to address….

As a result classroom libraries of 60 books are being established all grade 3 to 8 classes across the country.
 Considering that PNG is as large as the United Kingdom with much of it not accessible by  road, delivering books to every school in the country represents a major logistical challenge that is still underway. 
Selecting and procuring more than one million books was another challenge, as well as preparing teacher’s manuals and training DVDs to promote the use of these books via activities such as silent reading, paired reading, story time, and improved methods to teach reading.
Preparing, selecting and distributing the learning materials for younger children, much of it in vernacular languages as more than 800 languages are spoken in PNG, was yet another challenge we are addressing.
And finally, adapting and testing the reading assessment tools known as Early Grade Reading Assessment (EGRA) in four of Papa New Guinea’s 22 provinces is underway and is meant to give teachers and education departments officials practical tools to measure progress of the reading-related initiatives, including the ability to identify and address problems quickly.

…and successes to report

During a recent visit to Papua New Guinea I was able to see the progress of the PNG Read program. Reading scores in Madang province for both boys and girls have improved, interventions in the Western Highlands province are on track, and books for the classroom libraries are being distributed. In addition, teachers are being trained to use the materials to promote reading and improve reading scores.
In the capital Port Moresby I visited two local schools and observed that teacher training to promote reading has been quite effective.
Teachers are integrating the classroom libraries and reading sessions into their classroom schedules. Techniques such as having a reading buddy are being used to pair stronger readers with less-proficient readers to help those struggling to become more confident and willing to participate in the reading activities.
The PNG Read team is also working on the development of a new “Standards Based Curriculum”, which highlights the importance of data collection to inform curriculum planning.
This will strengthen evidence-based decision making going forward and the establishment of a strong and sustainable system.

Jeff Ramin is the GPE Country Lead for Papua New Guinea, Bhutan, Haiti, Maldives, Mongolia, Philippines, Timor-Leste, and Yemen.

InterOil spuds Antelope-5

InterOil

 

Singapore and Port Moresby, December 23, 2014: InterOil Corporation (NYSE: IOC; POMSoX: IOC) has started drilling the Antelope-5 appraisal well in Petroleum Retention License 15 in the Gulf Province of Papua New Guinea.

Antelope-5 is about 1.8 kilometers from Antelope-3 and will appraise the western extent of the Elk- Antelope field.
InterOil will keep the market informed of material developments.

***
About InterOil
InterOil Corporation is an independent oil and gas business with a primary focus on Papua New Guinea.
 InterOil’s assets include one of Asia’s largest undeveloped gas fields, Elk-Antelope, in the Gulf Province, and exploration licences covering about 16,000sqkm.
The company employs more than 2,000 staff and contractors.
Its main offices are in Singapore and Port Moresby. InterOil is listed on the New York and Port Moresby stock exchanges.

Prime Minister Peter O'Neill 2014 Christmas Message

2014 Christmas Message

Hon. Peter O’Neill CMG MP

Prime Minister

23 December 2014

 

Firstly let me take this opportunity to wish every citizen on our country a very Merry Christmas and a happy New Year.

As we end this year I know that it has been challenging year for all of us including our

Government and our country.

We again want to inform you that our country’s performance, in terms of the development of our country, is very positive and it is gaining strength and momentum as we are ready to enter the New Year.

Our economic growth over the past few months has been very stable - it has been growing at around 8 per cent per annum and indications are that we will end the year on a very strong note.

Our inflation has been very steady, our interest rates are very steady, our foreign reserves are very high, enough to cover six months of imports, and our employment levels in the country are continuing to increase because of the government’s strong commitment to the policies that we have introduced to our country.

Our strong investment in health and education is starting to produce results, we are seeing more kids in school.

We are also investing more money into higher learning institutions like universities, we are putting direct funding into those areas so that we could accommodate more students being taken into the coming year.

In 2016 we are putting more money as we have committed in the budget into those institutions, while the same time continuing to fund the free education program that we have so far successfully introduced for the past three years.

I know that it is not been an easy year.

Politically of course we have had some challenges, based on some ongoing and unfounded allegations, but as a Government we have been able to maintain some stability and of course that stability has allowed us to continue to achieve the outcomes that we have been able to do so this year.

We have also increased our investment in infrastructure.

Many roads throughout the country have been built, and as a result of that you can see that people are able to move freely, access services, and have ]access to markets where they can sell their goods and earn an income for their families.

We will continue to maintain that level of investment in 2015, 2016 and 2017, so that we can open up our country.

We are starting to invest more into opening up our country in some of our areas that have been isolated for many years.

Places like Telefomin, places like Simbai, Karimui-Nomane, places like Kandrian- Gloucester and many other places in the country like Kaintiba and Menyama and Aseki and all these places where no proper road infrastructure was able to connect them to receiving services that they are entitled to.

The Government is continuing to expand on investing in the road infrastructure that will link those communities.

We are investing more money to the districts which are now starting to maintain the roads and maintain the schools, to maintain the hospitals.

So all-in-all I think that we have had a very good year and I know that next year is going to be a continuation of that work that we have started.

We are continuing to invest money into the same priorities that we have invested in 2014 into

2015.

Because we can see the results, it is important that we continue to maintain the course of that investment.

 If we divert our attention elsewhere we are not going to achieve the results that we all want. We must invest in health, we must invest in education, we must invest in law and order, we must invest in infrastructure.

More work will be done. We cannot fix all the problems in one year, but I want to assure every citizen of this country that your Government will continue to work for you so that we can have meaningful change in this country, and as a result of that change, your life can get better and the life of your kids and your families can improve into the New Year and beyond.

So once again I want to take this opportunity to wish every man, woman and child, and the community throughout the country a very best Merry Christmas and happy New Year.

I know that next year is going to be challenging year.

Many of you know that we have had declining oil prices coming through the global economy, some of the global economies like in Europe and America are slowing down.

They are struggling to maintain some level of growth.

In some cases they are entering into recession.

These are a concern to our economy as well because we are selling to those markets.

China is also slowing down slightly, we hope they will continue to maintain their growth because they are our biggest customer.

Japan has entered into a slight recession, but hopefully with the re-election by Prime Minister Abe their economy will be entering positive growth because they are again very important customers of Papua New Guinea, very important trading partners of Papua New Guinea.

When their economies do well, our economy will do well as well.

We will as government continue to maintain a very close watch on many of these issues, especially how the global economy trends, but all-in-all I can assure you that the economy and the management of the economy and the management of our country is in good hands.

We have got a hard-working Government, hard-working ministers and a hard-working

Parliament that is working for the good of our people.

We look forward to seeing you in the New Year, and once again let me thank you for your support.

Thank for your prayers that has been able to give us the strength and the encouragement that we need to continue to work for our people.

Thank you and God bless each and every one of you.

 

 

 

PM O’Neill opens Raba Raba Jetty in Milne Bay

Prime Minister's Office

Thousands of people living in the area around Raba Raba Station in Milne Bay will benefit from

the construction of a new jetty that was opened by the Prime Minister Peter O’Neill  this week.

The people of Raba Raba will also have clean drinking water and sanitation for the first time in

their history following the commitment to build a water treatment plant.

 

 

As the nation prepares to celebrate 40 years of independence, the Prime Minister has further

committed K200,000 to restore burial headstones as a lasting memorial to two of the nation’s founding Fathers, Sir John Guise and Sir Kingsford Dibela.

In opening the jetty, O’Neill said he hoped the new infrastructure, that includes new roads

under construction, would deliver immediate positive change for people in villages around Raba

Raba.

“For the first time, agricultural producers in the area surrounding Raba Raba will have a more

efficient means for getting their product to market than in the past,” he said.

“We must build infrastructure that will be used by people throughout the country.

“This is a rural-focused Government, we are here to serve the majority of Papua New Guineas

who live in the rural communities around the country.

“We need services in the rural areas.

"We need healthcare and education delivered to the rural areas so that people can have better lives. To deliver these services we need to build the infrastructure that make it possible for government to deliver services, while at the same time businesses can grow and develop.”

The new jetty in Raba Raba is one of six jetties that have been delivered by the Member for Alotau Open and Minister for National Planning Charles Abel MP through his DSIP funding.

The jetties are constructed of concrete and steel to withstand cyclonic conditions and last for decades to come.

During the visit, the Prime Minister committed K1 million to build a water treatment system Raba Raba that will bring clean drinking water and sanitation to Raba Raba for the first time in
the station’s history.

“Access to lasting supply of clean drinking water and sanitation is a basic service that must be

delivered and we will build the water treatment plant.

“This is part of Government’s ongoing commitment to improve standards of living right around the

nation and access to clean water is part of this program.

“For too long Governments in Waigani have done nothing when the basic things such as water

should have been provided.”

O’Neill said in committing funding to restore the headstones of two of the nation’s founding

Fathers in Raba Raba was important for the nation.

“I want to thank you for producing some of the best leaders of Papua New Guinea, including Sir

John Guise, our first Governor General and Sir Kingsford Dibela.

“They have contributed immeasurably to our country and we must continue to honour them.

"Even as a small boy in Ialibu-Pangia we knew of Sir John Guise and Sir Kingsford Dibela.

“It is important that their memorials are restored and they are accorded the respect an dignity that

they deserve.”

Lupari: Polye-Flanagan seek to undermine economy for political self-interest

Office of the Prime Minister

 

Prime Minister's Chief of Staff  Isaac Lupari has raised concerns at political interference by a former Australian government advisor working with the Leader of the Opposition to undermine the government.
Lupari said that as a close advisor to the former Treasurer, recent articles written by Paul Flanagan were more political spin than real analysis and these views were not impartial.
"Despite claims by Mr Polye and Flanagan, Papua New Guinea is largely protected from oil price fluctuation because forward contracts were signed before the recent change in oil prices," he said.
"Their argument is based around the claim that Papua New Guinea will receive substantially less income from LNG sales and this is simply not true.
"PNG LNG exports and prices are predominantly locked into long-term forwards sales contracts.  In simple terms this means that Papua New Guinea will receive the same price for LNG.
"Mr Flanagan should know that LNG prices are locked in but he continues to play politics with business perceptions and the Opposition is going along with this nonsense.
"Polye-Flanagan appear to have no conscience when it comes to talking down the economy for their own political self-interest, and do not care of harm this could cause to small business and jobs in Papua New Guinea.
"Almost every budget in ever country in the world is framed around a theory of market fluctuation and expectation that prices will change.  The 2015 budget is designed according to these economic principles, so the Polye-Flanagan assertion that the 2015 budget is under threat is grossly misleading.
"Analysis and discussion on the economy is always welcome, but motive must be declared.  Mr Flanagan's agenda is very clear - it is political and unprofessional. If Mr Flanagan was genuine, he could have sought to engage with the Government and voice his concerns instead of playing games in the media.
"If the Leader of the Opposition does not understand the subject matter there are a number of truly independent experts who live and work in Papua New Guinea from whom he could seek advice."

PNG joins list of countries staring into the abyss

By ROWAN CALLICK

The Australian

Dec 23, 2014

 

PAPUA New Guinea has joined the list of countries severely damaged by the collapse in oil and gas prices.

It faces a spiralling budgetary deficit unless it swiftly adjusts to lower revenues and unwinds ­ambitious new spending, according to former Treasury official Paul Flanagan. “PNG had set itself on a slippery slope towards a crisis, and the world just gave it a great big shove,” he said.

If the government does not act soon, he said, “PNG will be going to the International Monetary Fund or another country seeking a large bailout”.

Opposition leader and former treasurer Don Polye agreed, yesterday saying the country’s budget deficit threatens to rise above 10 per cent, and the debt to GDP ratio to 75 per cent by 2017 — 2½ times the maximum level permitted by the country’s Fiscal Responsibility Act.

Mr Polye urged that the kina, the rate of which has been managed since June 4, be allowed to depreciate — claiming that international reserves would otherwise be exhausted within two years. “Unfortunately Santa Claus isn’t going to be visiting the government this Christmas.”

 Prime Minister Peter O’Neill responded that “the opposition leader should not panic, but needs to better consider the current ­global market situation before making irrational claims”.

He said that “price fluctuation is factored into the budget”, and the government was monitoring the situation. “Energy production is a long-term investment that will experience market turbulence. The market for liquefied natural gas remains strong.”

The government announced in its 2015 budget plans to cut spending by 6 per cent in 2016 and 2017.

Mr Flanagan, who was seconded as an adviser to the PNG Treasury from 2011 to 2013, has written a paper for the Development Policy Centre at the Australian National University, where he is now a visiting fellow, saying that LNG production had often been conceived as transformative for PNG. “But just at the time the country was to benefit from the revenue and foreign exchange flows from (PNG’s first, ExxonMobil managed, LNG project which came on stream in midyear), international markets have dealt a cruel blow,” he said. There would be no tax revenue from this first LNG project “for many years,” Mr Flanagan said — until depreciation allowances end.

The oil price collapse “also significantly reduces the viability of other LNG projects in the pipeline”, he said.

The country’s growth rate for 2015 was forecast in the budget — just six weeks ago — at a world-topping 15.5 per cent thanks to LNG receipts, but is now expected to reach 6.9 per cent. With good policies, suitable adjustments could be made. “However, PNG has moved to poor policies over the last six months such as moving away from a market-based exchange rate, starting to print money to fund the deficit, and deciding on an unsustainable fiscal policy in the 2015 budget,” Mr Flanagan said.

The adjustment needed to avoid a crisis is thus all the more painful, Mr Flanagan said, urging that the 2015 budget be rewritten to avoid a spiralling deficit: “Good public policy making just became much harder — but also more ­important.”

The shift from the market-based kina, he said, triggered a fall in income for PNG’s 2.1 million people who depend on coffee-growing, as well as other small-scale agricultural producers. The kina has since risen by 22 per cent against the Australian dollar since the June 4 intervention — “which makes no economic sense unless payments against major loans in US dollars are being protected”.

The return to a market-based exchange rate would provide a “shock absorber” for the economy, he said. “Market estimates are that the oil price will recover, but only very slowly — and by the end of 2019 it would still be nearly 30 per cent lower than PNG Treasury forecasts.”

At a PNG Mining and Petroleum conference in Sydney earlier this month, Mr O’Neill detailed the government’s “record investment” via the 2015 budget “in free primary education, free universal health care, and expanded skills training.”

The country remained, he said, “a sound and secure nation in which to invest to do business.”

The Asian Development Bank said in its recent regional review that the rest of the PNG economy beyond mining and petroleum was unlikely to salvage the ­dilemma — with its growth forecast at just 1.6 per cent for 2014, and with 2015 returns shadowed by the boosted kina.

Pruaitch: Government monitoring world commodities markets

Office of the Minister for Treasury

Minister for Treasury, Patrick Pruaitch, in response to the Opposition Leader’s claims in the Post-Courier front-page report yesterday about falling commodity prices, re-assures the country that the Government is fully aware of the current developments in the world commodities markets and is closely monitoring the movements in prices.

“As a responsible Government, the O’Neill-Dion Government is monitoring the developments very closely and is fully aware of the implications the falls in prices will have on the economy particularly on Government revenues,” the Treasurer said in a statement.
“The Government , however,  believes that it is too early to be making any adjustments to the 2015 Budget for now.
“At this stage, there is no need to panic.
"The Government is fully aware of the situation and is looking ahead at the options available should the need to adjust arise.”
Pruaitch assured the people of Papua New Guinea that the Government would take all the necessary measures to ensure that the adverse movements in the revenue outlook were contained and that the 2015 Budget remained on track for the stated fiscal targets.
“Whilst the oil prices have fallen by 36.6% since the 2015 Budget, copper and gold prices remain on track. 
"They have only declined by 6.1 and 7.2% respectively since the 2015 Budget, contrary to the 40% price decline as claimed by the opposition leader.
“For the LNG exports, whilst world LNG prices depend and trend closely to the world oil prices, much of the PNG LNG exports and prices is locked in the long term forwards sales contracts.”
Pruaitch whilst he had been unwilling to respond to Opposition Leader directly, "these are other recent statements in the Press recently that are utterly irresponsible. 
"Now is the time for cooperation to give Papua New Guineans the true facts and not political point scoring."
He said the Opposition Leader's statements were extremely consistent with the former head of the Australian advisory team during Polye’s tenure in Vulupindi Haus. 
"In some instances,  it is difficult to work out whether these thoughts are Polye’s or those of this advisor,  which is receiving a lot of air time in the mainstream and social media," Pruaitch said.

 “For my department, we are well aware of the scenario and will take the necessary measures to ensure that external impacts are mitigated as much as possible.

“Developments in the world economy is something that is beyond everybody’s control and it is times like this when responsible Government’s will need to be proactive and have contingencies in place to be able to effectively deal with such circumstances.
"This is what the O’Neill –Dion Government is doing and is asking everyone to be patient and to refrain from making claims that could drive public perception – remember perception drives fear more so than facts.
“Finally let me re-assure the nation that, the Government understands the implications of the recent sharp movements in commodity prices particularly oil and will be monitoring it closely as we head into Christmas and the New Year.”

Marape: No need to panic

Office of the Minister for Finance

The Government is confident the 2015 Budget assumptions are safe despite the fall in the price of oil.Finance Minister James Marape said this yesterday, despite the "doom and gloom predictions of an Opposition Leader (Don Polye) determined to talk down a growing economy"

“While we welcome the advice proposed by the Opposition, this needs to be based on fact instead of drivel,” Marape said.

“There is no cause for alarm and this is not the time for a knee-jerk reaction, as proposed by the Opposition.
“A number of factors have contributed to the current market, with the oil price trending downwards. In less than two months the global oil price slumped about 35%. It may take the same period, if not less, for the price to climb back up and beyond.
“You do not have to be a former Treasurer to understand that this is how a market works. 
"Even high school students know that markets fluctuate, so I think the former Treasurer could be more considered in what he says.
“As a responsible government, we are watching these trends very closely.
"We are not about to over-react, nor should anyone else.
“The factors causing these price swings are beyond our control.
"All we can do is closely and carefully monitor the situation, and act to protect our interest when the time to review our budget comes around.
"That time is June next year when Treasury releases a review of the Budget."
 Marape said forecast for the revenue from the PNG LNG project remained on track because the sale price was locked into long-term contract agreements signed with the customers.
He also said the Central Bank’s decision to intervene in the currency market was a decision that the government welcomed.
“The buy and sell margins were too wide, and the commercial banks were sitting back and making money at the foreign exchange market, at the expense of our people and visitors, so the Central Bank intervention is timely and one we fully support," Marape said.
“The kina exchange rate against its major trading currencies remains stable around levels very attractive to exporters.
"Members (MPs) should be back in the villages using their district funds to help people get their coffee, copra and cocoa and other export crops to the market.
“Members (MPs) should not be holed up in hotels in Port Moresby listening to prophets of doom who preach nothing but negative politics.
"It’s the festive period and we must be with our people to celebrate Christmas.”

PM O’Neill opens Simbai to Madang Road

Office of the Prime Minister

The National Government has completed another significant road infrastructure project with the delivery of the road linking the people of Simbai in the Middle Ramu district of Madang Province through to Madang.

Prime Minister Peter O'Neill launched the Simbai to Madang road when he visited Apenam village in Madang  last week.

Speaking with people who will now use the road,  O’Neill urged them to make good use of the infrastructure to improve lives in their community.
“I hope you use this road to do business and carry goods, to find more work, go to healthcare centres and visit your family.
“You government is behind the people in rural areas and will continue to build our road network.
“We have made a commitment to build infrastructure that improves the lives of people all around the country, from the cities and towns to the most rural villages.”
The Prime Minister said economic growth creates opportunity for businesses and he urged the people to work together to make bigger changes for their communities.
“Roads are a link for economic development by allowing for the easy flow of goods and services such as healthcare, education and other vital services to reach majority of the people in rural areas,” said the PM.
O’Neill reiterated that more funds have been put into rural areas by the government and he wants to see this work to continue to improve the livelihoods of the people.
“We have been investing heavily in infrastructure as it is one of our core priorities and already we have seen many changes in all our road networks in many rural areas through to our cities,” said O’Neill.
The PM has promised the people that he would send works engineers to carry out a study on the Ramu River and a bridge would be built. In the meantime, a pontoon would be in place to move vehicles across the river.
 O’Neill also went to Simbai late in the afternoon to officially open new classrooms in the presence of thousands of local people.

Mining starts at Crater Mountain, Eastern Highlands

Published: Friday, 19 December 2014 16:15
Written by ASIA Miner News 

Crater Gold Mining has commenced gold mining at its High Grade Zone (HGZ) project at Crater Mountain in Papua New Guinea’s Eastern Highlands Province.

 

The HGZ mine becomes the first new gold mine in PNG for eight years.

Following the signing of the Mining Lease by the Minister for Mines Byron Chan on November 5, 2014 the company has successfully concluded a compensation agreement with the landowners and formally registered it with the Mineral Resources Authority of PNG.

Crater Mountain is 50km southwest of Goroka.
Formerly a tier-1 BHP asset, there has been in excess of 14,500 metres of diamond drilling to date, the majority focused on the Nevera prospect, which hosts the HGZ mine.
Crater Gold’s CEO Greg Starr says, “This is an exciting milestone for the company as we have successfully transitioned from explorer to now become PNG’s newest gold producer.
“We anticipate producing some 10,000 ounces of gold in the year ahead at an all-in cash cost of below $400 per ounce average over the Mining Lease term, positioning the mine within the lowest quartile in terms of operating costs.
"Our Mining Lease enables us to continue mining for the next five years with the right to extend the Mining Lease.
“As a high margin operation, the HGZ project will generate strong cash flows, which will fund further development at the HGZ mine and exploration activities at the company’s other assets.
“On behalf of the Board I thank all those who have assisted us in bringing HGZ into production, particularly our management team and dedicated local staff.”

* The January/February edition of The ASIA Miner will include a feature article on Crater Gold and its work in PNG.

O’Neill: Offer thoughts and prayers following tragic recent events

Office of the Prime Minister

Prime Minister Peter O’Neill has asked Papua New Guineans to offer their thoughts and prayers for the families involved in recent tragic events, and to embrace their own family and friends and give thanks for their communities.
O’Neill said this is the time of the year that should be filled with joy as communities prepare to celebrate Christmas and welcome the New Year, but recent weeks have seen tragedy.
“The death in Australia of eight children from the Torres Strait this week, the massacre of more than 100 children in Pakistan, the murder of hostages in Sydney, and the deaths of Papua New Guinean police officers have marked a sad time as we prepare for Christmas.
“What should be a time of happiness has been filled with grief and outrage and as a community we need to pull together, pray and reflect on the positives things in our lives.
“As we prepare for Christmas this weekend, in your homes and in your churches, I ask Papua New Guineans to do two things.  I ask you to pray for the families of people lost to these recent incidents, and I ask you to embrace those who are close to you and to give thanks for all we have that is good.
“Give thanks for your family and friends, give thanks for your community and give thanks for this blessed country in which we live.
“We have a lot to be grateful for and Christmas is a time to offer thanks and gratitude.”
O'Neill said the death of eight children from the Torres Strait had shocked the world and he has offered his condolences on behalf of PNG.
“Our nation grieves with people in Cairns and around Australia at the senseless loss of eight young lives.  May their young souls find eternal peace.
“Sadly, this is the third time this week our nation has extended condolences for a horrific event.
“These terrible occurrences cannot be reversed, but we can unite in grief and all do our best to build a brighter future.
“Lets look after each other, and look after our communities.”

Papua New Guinea’s vanishing LNG export boom

By Paul Flanagan on December 20, 2014

DEVPOLICYBLOG

PNG must adjust to lower LNG/oil prices to avoid a crisis. The PNG LNG project is still extremely important but many of the benefits of the production phase of the project have vanished because of lower prices – probably for at least a decade. This note outlines the impact of the recent oil price falls on PNG’s budget, growth rates, and balance of payments and international reserves. The broad conclusions are that: there will be no tax revenue from the PNG LNG project for many years; deficit and debt levels will become even more unsustainable; the 2015 growth rate will more than halve; the balance of payments will be in overall deficit even with the PNG LNG project coming to full capacity in 2016; and, without an exchange rate depreciation, PNG’s international reserves will be exhausted in two years.
A policy brief is available which provides the technical detail of this analysis. The key findings and policy recommendations are set out below.
LNG and oil prices
Figure 1 shows that oil prices are now more than 30% lower than the level forecast in last month’s 2015 PNG budget. LNG prices are directly linked to oil prices according to the IMF so the reduction in LNG prices will be similar. This price drop in a key commodity (LNG/oil) is a classic example of what economists call an “external shock”.

Figure 1: Oil prices – market prices, futures and PNG forecasts

Note: Author’s calculations for all graphs and figures available here.

Budgetary impact
The analysis of the policy brief predicts that with a 30% fall in LNG/oil prices there will be no taxes collected from the PNG LNG project for up to a decade. This is because a fall in gross revenues of 30% is greater than the expected pre-tax profit rate (after allowing for depreciation). LNG dividends are still expected but at a much lower level. Revenues from current petroleum fields such as Kutubu will also be much lower.
The net impact on the budget is a loss relative to the 2015 budget of about K1,400 million in revenue in 2015 and 2016 and above a billion in future years. This represents more than 10% of all PNG’s domestic revenue resources. In addition, there are off-budget impacts that will substantially reduce the net wealth of the PNG government. This includes a fall in the value of Oil Search shares (now estimated to be worth K600 million less than at the time of purchase) as well as a significant portion of the K3.3 billion in LNG dividends and mineral/petroleum taxes that “disappeared” in the 2015 budget, presumably earmarked for various off-budget expenditures, such as paying back the Oil Search loan.
As shown in Figure 2, resource revenues to the PNG budget have traditionally been volatile. The 2014 budget painted a rosy picture of expected revenues from the LNG project. By the 2015 budget, a significant part of these returns, especially LNG dividends, were moved off-budget (presumably held in the proposed Kumul Holdings). As noted above, these funds amounted to K3.3 billion between 2016 and 2018. The bottom line on the right is the estimate of resource revenues to the PNG budget given a 30% fall in LNG/oil prices. These revenues return to the levels of the late 1990s and early 2000s when PNG faced another major drop in commodity prices. At an aggregate level (including all PNG’s tax and non-tax revenues), 2016 revenues drop to K10.9 billion in nominal terms, K2.5 billion less than the K13.4 billion expected only thirteen months ago at the time of the 2014 budget. This is a very large fiscal hit of just under 20%.

Figure 2: Resource revenues over time

The direct result of these revenue losses is that there will be no revenue growth after inflation from 2014 to 2018. Without policy action, the deficit in 2015 will be not 5.3% as per the budget (using IMF guidelines, as explained here), but 8.8%. The debt to GDP ratio will stay about the legal cap of 30% and, on realistic expenditure assumptions, may rise to 75% by 2017 – two and half times the maximum level in the Fiscal Responsibility Act.

GDP growth impact
The change in the value of PNG’s major new export inevitably also affects the measured size of the economy or GDP. The revised LNG and oil price estimates reduce growth forecasts to 7.0% in 2014 and 6.9% in 2015 (down from 8.4% and 15.5% respectively). The PNG LNG project is extremely important for PNG. However, its importance has been diminished by the new commodity price outlook.
Impact on balance of payments and international reserves
The forecast in the IMF’s 2014 PNG report is for an increase in PNG’s net international reserves from $US2,427 million in 2014 to $US3,845 million by 2016. But allowing for the fall in oil and LNG prices, net international reserves are in fact expected to fall to $US2,049 million in 2015, covering just over three months of imports of goods and services. Reserves would keep falling below this critical level and PNG would be out of foreign exchange by early 2017. This is because the fall in prices moves PNG to a substantial balance of payments deficit (not the surplus that was originally forecast). Clearly, given the need to have some level of import cover, something has to happen soon. Otherwise, PNG will be going to the IMF or another country seeking a large bail out.

Figure 3: Impact of oil price shock on net international reserves

Conclusion
The PNG LNG project has often been thought of as transformative for PNG. But just at the time the country was to benefit from the revenue and foreign exchange flows from this major project, international markets have dealt a cruel blow. The decline in LNG prices also significantly reduces the viability of other LNG projects in the pipeline. With good policies, adjustments could be made to deal with such a drop in oil prices. However, PNG has moved to poor policies over the last six months such as moving away from a market based exchange rate, starting to print money to fund the deficit, and continuing with an unsustainable fiscal policy in the 2015 budget. PNG had set itself on a slippery slope towards a crisis, and the world just gave it a great big shove.
But this is a problem that can be solved, provided that real changes are quickly made. At the end of its financial year for 2014, the PNG government should not spend any extra money, but instead pocket any savings from unspent allocations. In face of such a large shock, there is a need for an urgent public debate in PNG on other policy responses. This should cover how the 2015 budget should be rewritten to avoid a spiralling deficit. PNG also needs to move back to a market-based, floating exchange rate to provide a “shock absorber” for the economy, and find better ways to fund the deficit than printing money.
Paul Flanagan is a Visiting Fellow at the Development Policy Centre, ANU. He was formerly a senior executive in the Australian Treasury, and went on secondment as an advisor to the PNG Treasury from 2011 to 2013.

Mining boom no cure for PNG poverty: Kiwi development expert

   

 

WELLINGTON, Dec. 19 (Xinhua) -- Papua New Guinea (PNG) is facing a key challenge in transferring its massive mining industry profits into improving the lives of the half of the population living in poverty, the New Zealand author of a United Nations report on the Pacific island nation said Friday.

Mining and oil production had reaped 60 billion U.S. dollars since independence 40 years ago, but 40 percent of PNG's 7 million mostly rural population lived on less than a dollar a day and a quarter of children had no schooling, Glenn Banks, an associate professor in Development Studies at Massey University, said in a statement.

The lead author of the "Papua New Guinea National Human Development Report 2014" for the United Nations Development Programme (UNDP) said PNG was experiencing a "paradox of plenty," with 14 years of economic growth and the economy set to grow by 20 percent next year, but little change in poverty levels and rising inequality.

The report noted improvements in human development, such as increases in life expectancy, per capita income and educational achievement, while highlighting the significant opportunities from an economic boom based on the mining of gold, silver, copper, cobalt, nickel, crude petroleum and natural gas.

While large scale mine and oil production has underpinned some health and education developments, it has also "sparked civil strife, caused massive environmental damage, arguably distorted the economy, and brought about a range of negative impacts on communities," according to the report.

Banks said better governance and public service delivery, as well as more effective, inclusive policies were among policy options that would address the problems.

Appointing a mining ombudsman and an independent grievance mechanism to resolve conflicts of interest between indigenous landowners and mining corporations were also key options.

"We've already had good feedback from within government that they are interested in talking further with UNDP to put into place some of the ideas the report proposes," said Banks.

Miss Samoa crowned Miss Pacific Islands

Radio New Zealand

 Miss Samoa Latafale Auva'a has won the first Miss Pacific Islands Pageant in Apia.
The 20-year-old Law and Music University student from New Zealand also scooped the two main categories for the pageant, best talent and best interview.

Miss Samoa Latafale Auva'a

 Miss Cook Islands, Antonina Browne, was the first runner-up, Miss Fiji, Nanise Rainima, was second runner up, Miss American Samoa, Anneliese Sword was third runner up and Miss Papua New Guinea - Grace Nugi was fourth runner up.


Miss Pacific Islands Pageant participants


 Miss Nauru - Kauai Oppenheimer won the Miss Internet, Miss Fiji won Miss Photogenic, Miss Niue, Nina Nemaia was voted Miss Personality, and Miss American Samoa won the National Tourism Award.

Prime Minister offers national sympathy for Pakistan

Office of the Prime Minister

Prime Minister Peter O’Neill  has expressed his indignation at the murder of more than 100 defenseless people in Pakistan this week, noting that all countries in the international community have to work together for a more peaceful global environment.
“It is with heartfelt concern and a sense of deep outrage that Papua New Guinea has received news of the murder of 141 people in Peshawar on 16 December 2014,” Prime Minister O’Neill said in a letter to his counterpart, Mohammad Nawaz Sharif. 
“With the majority of these victims being children, the grief caused by this attack is further exacerbated.
“May I offer deepest sympathies and prayers from the people of Papua New Guinea to the people of Pakistan following this tragic event.”
O’Neill said while the attack in Pakistan and the earlier siege in Sydney were domestic matters for their respective countries, there were global factors and grievances that had fed into both situations.“Our two nations might be separated by distance, but we are joined through a common concern to see the prevention of such acts of senseless violence,” the Prime Minister said in the letter to his counterpart in Pakistan.“Papua New Guinea joins with Pakistan in international forums, including The Commonwealth and the United Nations General Assembly, to work together in developing collective solutions for a safer international community.”
The Prime Minister said all nations have an obligation to make effective use of their membership of international forums to discuss underlying issues that lead to violence, to overcome animosities and improve understanding between people.
“We are blessed in the Pacific that we live in one of the most peaceful regions on the planet.“But we are also part of the global community and we will offer our support in the United Nations, the Commonwealth and other forums, to initiatives that promote peace and understanding between people.”

Prime Minister calls for better protection of police

Office of the Prime Minister

 

 Prime Minister Peter O’Neill  has called for a review of procedures to better ensure the safety of police undertaking their duty of protecting the community.

O’Neill made the comments following recent attacks on police personnel that have ed to the deaths.

“I am greatly concerned about these instances of violence against our police and I am talking with police leadership about how procedures and processes can be reviewed to better ensure the safety,” he said.

“Although these recent cases appear to have been carried out by individuals, some of hem drug-induced, some under the influence of alcohol, we must stop this from  happening.

“One immediate measure is to issue directives that police do not go out alone, but discharge their duties in pairs.

“That happens in many parts of the world so that individual policemen and women are not going around by themselves in uniform, but are partnered.

“Indeed, policing is a dangerous job in any country, and as a government we must work to ensure the safety of our police as best we can.”

O'Neill called on the public to be grateful for the work of police and to be vigilant for people who might seek to cause harm to police.

“We express our deep sorrow and regret to the families of our brave police that have lost their lives, and been injured, in the course of their duties.

“Our police have dedicated their lives to the protection of the men, women and children of Papua New Guinea and to ensure that our communities are safe.

O'Neill said the Government continued to allocate greater funding each year for better training of Papua New Guinea’s Police with a focus on improving police skills to patrol their communities.

“We need our police walking our streets and markets, and working with members of the community to identify law breakers and bring them before the courts.

“Our community policing skills continue to be upgraded and our government will continue to strengthen capacity in this area.”

Commission of Inquiry report on brief out matters presented to National Government by Judge Warwick Andrews

Office of the Prime Minister

 The National Government has received the “Report on the Commission of Inquiry into Processes and Procedures used to Brief Out Matters to Law Firms, and Processes and Procedures for Paying Public Monies to Law Firms” from Judge Warwick Andrew.

In receiving the document today, Prime Minister Peter O’Neill,  said the completion of the report by Judge Andrews and his team would provide clear direction for the Government officials in ensuring transparency and proper process, and save millions of Kina in legal bills.

 

“This area of brief outs has been the subject of abuse for many years, well before this government came into office,” O’Neill said in receiving the report.

“As a government we have been receiving the raw end of this discussion, mainly because we’re trying to clean up the mess that has been there for a while.

“There are some issues that are still out there for public debate and of course some issues are before the courts.

“But we will present this in the coming session of the Parliament so that we can make sure that we tighten up the procedures in which the brief outs are being made in the future to many law firms that have been acting about half of the state for many years.

“I know that these recommendations will save the state lot of funds and excessive abuse that is being happening for quite some time, and as result of this inquiry we are going to ensure that there are strict guidelines that are going to be established from here onwards.”
Judge Andrews made the following statement before presenting the report to the Government:“The report was the initiative of the Prime Minister.
“Despite previous investigations having been made into the processes and procedures for clients and brief out of legal matters to law firms, and despite several recommendations having been made, the area remains the subject of abuse.
“The focus of this inquiry, under the terms of reference, has been to the reform of the system by way of instituting proper control mechanisms.
“As is well known, the state has made vastly excessive amounts of legal work carried out by private law firms from the past.
“The commission believes and hopes that if its recommendations are implemented there will be appropriate systems in place which will prevent such abuse.
“The commission has been completely independent, there has been no interference with the commission in any way, either political otherwise, by anyone at all.
“Having said that I would now like to present the report to the Prime Minister.”

Prime Minister opens Lae Port Tidal Basin Project

 Office of the Prime Minister

Prime Minister Peter O’Neill has congratulated stakeholders involved in the work undertaken to complete Phase 1 of the Lae Port (Tidal Basin Project).

 

He extended his congratulation to the contractor, China Harbour Engineering Co. (PNG) Ltd, the landowners, Independent Public Business Corporation (IPBC), PNG Ports and all the people who were involved in the project on Wednesday.
O'Neill said Phase 1 of the project was delivered ahead of time and under budget and that cabinet has also approved the start of Phase 2.
He said the opening of Phase 1 of the new port in the Lae Tidal Basin was a very important occasion for the country.
“This is another demonstration of our ability as a country, as a government, as a community and as people to deliver world class infrastructure,” O’Neill said.
“As many of you know, our government has made infrastructure development a priority, and this is another major piece of our national infrastructure that will serve the people of Papua New Guinea.”
O’Neill said the port would benefit not only the people of Morobe, it would also serve people in the Highland provinces who get their goods freighted to the port then up to the highlands by road.
He said landowners of the tidal basin would also benefit through opportunities such as stevedoring as did landowners of the old port, and more broadly thousands of additional jobs would be created.
“When fully operational, this port will create new jobs and related opportunities for over 5,000 people - with projections of this reaching 10,000 as port business increases in the coming years.”
Currently around 55 vessels call into Lae port each month and this will increase substantially with the wharf extension, generating increased revenue through pilotage, wharfage and berthage revenue streams.  This means more larger vessels, heavier machinery and increased throughput to meet the growing economy in the country as well as the Asia/Pacific region.
The trade forecast for the coming year is for the movement of over:

- 130,000 containers for international shipping.

- Over 56,000 domestic containers.

- Break-bulk and Liquid Bulk movement to be over one million revenue tonnes.

Papua New Guinea’s fine cocoa back from the brink of disaster

Updated 17 December 2014, 17:33 AEDT

Carmel O'Keeffe with Andrew Moon
Australia Plus
           

Farmers are a tough breed and when the whole community’s livelihood is at stake there’s no such thing as giving up.

The saying about the tough getting going when the going gets tough could have been created with Odelia Virua Taman in mind. 

Cocoa farmer Odelia Virua Taman tells Food Bowl presenters Anath Gopal and Leesa Burton how her community overcame adversity.

The cocoa farmer from Papua New Guinea’s New Britain province summoned her courage and her community to face a threat to the coca crop that put their lifestyle and livelihood in jeopardy.

A moth pest called the Cocoa Pod Borer (CPB) was detected in PNG in 2006.  It ripped the heart out of the economy and East New Britain which had been responsible for more than 50 per cent of PNG’s cocoa production.
“It was disaster. Every time I speak about it I remember the pain and suffering. We had banana for breakfast, banana for lunch and banana for dinner. We went through a period of a terrible time,” says Odelia.
But thanks to a community commitment to manage the pest driven by farmers such as Odelia, who is secretary of the Tavilo Farmers Cooperative, the crop is now thriving and known for its quality.
For Odelia the motivation to succeed was clear cut:  “(I hope) for everybody to have a high standard of living. To be able to afford school, education for your children, hospital, bills; to be able to have electricity.  These are basic requirements,” she says.
“You have a goal in front of you and you go for it.  That’s Odelia, that’s me.”
Odelia’s story is just one aspect of Papua New Guinea's agricultural success covered in Episode 2 of Food Bowl on Australia Plus Television.  If you miss the broadcast catch the program later on our Watch Now service.
 

- See more at: http://www.australiaplus.com/international/2014-12-17/papua-new-guinea’s-fine-cocoa-back-from-the-brink-of-disaster/1400019#sthash.ekFx3VDk.zKTITB2s.dpuf