‘Bold’ 2013 Budget brings more risks

Source: The National, Thursday 06th December, 2012

By MALUM NALU

THE 2013 Budget is a “bold” attempt to improve service delivery at the provincial and district level, according to Asian Development Bank’s PNG country economist Aaron Batten.

Batten, speaking at ADB’s PNG year-in-review at the Grand Papua Hotel in Port Moresby, said this “boldness” brought increased risks, including:

·         Emergence of structural deficit, and unrealistic recurrent expenditure constraint required for a return to surplus; and

·          Capacity of govern­ment to implement scaled-up sub-national funding pipeline.

“The role of ADB, and development partners, is to partner with government to implement their ambitious objectives,” he said.

Batten said the 2013 Budget was framed against a slowing economy, and falling copper and oil exports, resulting in a tightening revenue scenario.

“LNG will help alleviate these pressures, but not for some time, while expenditures grow at a record pace, resulting in a sharp deterioration in the budget balance,” he said.

“Public debt will likely remain relatively moderate by historical standards, but without expenditure restraint, debt will begin to push up against ‘sustainable’ limits.

“Medium-term challenge is whether expenditure gap can be closed.

“Major challenge will be achieving the targets set for the recurrent budget, creating significant downside risks for the ‘return to surplus’.

“New spending is focused on priority sectors (education, health, infrastructure, law-and-order), with majority of ‘new expenditure’ allocated to sub-national government, which will amplify pressure on provincial expenditure systems that have historically struggled to fully implement their funding.”

Meanwhile, ADB’s partnership with PNG has grown in recent years with a significant pipeline of new investments planned for 2013-15, according to country director of Port Moresby resident mission Marcelo Minc.

These focus in particular on transport infrastructure including US$199 million Lae port development;  US$157 million highlands region road improvement with a further US$120 million slated for 2013-15;  US$88 million on rural bridge replacements;  and US$73 million civil aviation development investment programme with a further US$230 million for 2013-15.

“ADB increasingly delegates implementation of projects to PNRM (Port Moresby Resident Mission), which helped to improve the pace of project implementation and the speed of loan disbursements,” Minc said.

Minc said ADB:

•    Continues to strengthen partnership with PNG, ensuring projects are relevant and high impact;

•    Strengthens infrastructure investments by also providing knowledge and leveraging co-financing from donor partners and/or private sector; and

•    Focuses on strong implementation to maximise the  inclusiveness of growth and service delivery.

Big fishing nations fail to cut their overfishing, says PNA

From Anouk Ride in Manila

MANILA, PHILIPPINES, THURSDAY 6 DECEMBER 2012: The Western and Central
Pacific Commission (WCPFC) meeting closed today with a temporary measure that allows big fishing nations to continue to overfish bigeye tuna, said the Parties to the Nauru Agreement (PNA).

The PNA manages the world’s largest sustainable tuna purse seine fishery – 50% of the world’s skipjack tuna, the most commonly canned tuna, comes from its waters. While skipjack tuna is fished at sustainable levels, bigeye tuna, a popular sashimi fish is overfished – a problem caused by catching juvenile fish around Fish Aggregating Devices (FADs) and longline fishing vessel catch by the big fishing nations such as EU, US, Japan and the other Asian nations.

Each year the WCPFC brings together the Pacific Island countries and the big fishing nations to meet and decide rules for fishing of tuna throughout the Western and Central Pacific Ocean, the world’s largest tuna fishery. The meeting closed today having decided a new conservation and management measure on tuna which will be applied until the end of 2013. The meeting also banned setting nets on whale sharks in the waters from 20 degrees South to 30 degrees North.

PNA Chair Nanette Malsol said: “This year at the tuna commission meeting, PNA was successful in getting a ban on setting fishing nets around whale sharks and in getting the commission to ‘flick the
switch’ so Pacific countries can see all fishing vessels in their waters that are on the commission vessel monitoring system which closes a loophole for illegal fishing.”

“However, the big fishing nations did not make any significant commitments to cut their overfishing of bigeye tuna. It is the big fishing nations of the EU, US, Japan and Asian nations that have
historically overfished bigeye tuna, it is their longline fishing vessels that are responsible for much of the catch of adult bigeye tuna which is still fished 40% over the sustainable level.”

“This week, Korea and Chinese Taipei only agreed to voluntarily cut their longline catch by 2% and China by 10%.”

“The PNA are global leaders in conservation and management of tuna. Within our waters, which cover 50% of the world’s skipjack tuna supply, the most commonly canned tuna, we still have the world’s best tuna conservation and management measures – fishing effort is capped by a set number of days vessels can fish, there is an independent observer on every one of our fishing vessels, there are limits on Fish Aggregating Devices (FADs) and closure of high seas to all purse seine fishing vessels licenced to fish in our waters.”

“We also will continue to work through leading industry initiatives – such as certification by the Marine Stewardship Council (MSC) that our skipjack tuna caught without FADs is sustainable – to help supply tuna with the best environmental and social standards to the world.”

“While this year the tuna commission failed to take its responsibilities seriously regarding the fate of tuna, PNA will continue to ensure its skipjack tuna is sustainably managed and push for a better conservation and management measure at the next WCPFC in 2013.”

Australia pledges A$20 million for TB in Western province

By Liam Fox, 

ABC

Australia's Foreign Minister has announced an extra AUD$20 million to tackle tuberculosis in Papua New Guinea's remote Western Province.

Bob Carr pledged the extra funding at the opening of the annual Australia-PNG ministerial forum, in Port Moresby.

He says Australia wants to cure 85 percent of TB cases in Western Province and the money will be used to expand local health services and train staff.

It is in addition to $11 million dollars that is being used to upgrade TB facilities at the hospital on Daru Island.

Western province is only a short boat ride from the outer islands of the Torres Strait in far north Queensland.

It has the worst health indicators in PNG and a growing number of cases of drug-resistance.

Senator Carr has already announced Australia would contribute millions of dollars towards the PNG government's plan to provide free education and plans for 1,400 nursing and midwifery scholarships.

The Australian Greens Party says the package is a sweetener in return for the PNG Government reopening a detention centre on Manus Island, where Australia's sending asylum seekers for processing.

But the Australian Immigration Minister Chris Bowen says the spending is justified.

"We've made it clear that we want our presence on Manus Island to be of benefit, which is an area doing it tough, and is in need of assistance. A part of Papua New Guinea, which is an imminently justifiable target for Australia's aid assistance," said Mr Bowen.

Papua New Guinea: Banking the great unbanked

OXFORD BUSINESS GROUP The potential of mobile phone banking in Papua New Guinea (PNG) has been evident ever since a local telecoms company launched a service in 2009 allowing subscribers to purchase electricity by using pre-paid airtime credit. For PNG’s banks, it presents the easiest route to tapping into the nation’s 87.5% rural population. Loi Martin Bakani, the governor of the Bank of Papua New Guinea, supports this idea, stating at the 2012 PNG Advantage Summit in September, “For the majority of the rural population to become part of the market economy, financial inclusion of the rural majority through financial literacy, microbanking and technological innovation through the use of mobile phone banking is a must”. However, microbanking is as much a necessity. PNG’s mountainous, forested and fractured landmass, including large islands with substantial population centres, has long been a barrier to political and economic inclusion. The proliferation of mobile network coverage across 70% of PNG’s 425,000 km has overcome much of these difficulties, however, and through the early adoption of mobile banking technologies, PNG’s potential mirrors mobile money exemplars the Philippines and Kenya. “Papua New Guineans are very keen technology adaptors and will readily pick up on all new technologies,” John Mangos, the CEO of Digicel, told OBG. "Financial services is one area where mobile devices can be used to a far greater extent”. The expansion of the banking sector is piggybacking on PNG’s mobile networks, which had a total of 2.4m subscribers in 2011, equivalent to a 38% market penetration rate, up from just 4.6% in 2007. The Asian Development Bank (ADB) estimates that some 85% of PNG’s population has little or no access to banking services. Expanded network coverage has largely eliminated the requirement for hard infrastructure investments in remote or potentially low-yield regions, issues that perpetuated poor branch and service coverage, making retail banking an inefficient and loss-making business for banks, according to Ian Clyne, the group CEO of Bank South Pacific (BSP). A move to digital banking and electronic transactions is set to circumvent these issues, providing cost-effective and efficient services to the unbanked. The switch also helps reduce operational risks, minimise the transit of large quantities of cash and improve internal accounting transparency. This has been embraced by BSP, which already has 250,000 registered e-banking users and is making a concerted strategic effort to move its mass-market customers out of its branches. By rolling out “Branchless Banking”, BSP is providing electronic services to its customers through ATMs, mobile point-of-sale units, mobile phone banking and subsidiary BSP Rural. Recording a net annual profit of $326.56m in March 2012, BSP’s service modernisation strategy is expected to deliver more than 1.5m retail customers by 2014, and although market space is restricted, diversification of the industry’s service providers is expected. Earlier this year, PNG’s central bank granted a mobile banking licence to Digicel Financial Services, a Digicel subsidiary, stating that, “Non-bank financial service providers, such as mobile network operators and postal service companies, are in a better position to extend financial services to the niche market using their extensive mobile network coverage and their existing network of agents around the country.” The central bank’s move builds on the success of PNG Post’s “Salim Moni Kwik (send money quickly)” service, as well as the Sepik Savings and Loans Society launching its own mobile banking service this month, “MiCash”, in partnership with Nationwide Microbank. Westpac and ANZ Bank are also reported to be expanding their operations, but are trailing behind BSP, which alone moves 80% of the nation’s cash. While the technological and regulatory environment is certainly conducive to further development of the industry, according to a recent multi-lateral study led by the International Finance Corporation (IFC), further mobile-led e-banking applications may be present, given PNG’s limited utilisation of cash. The shift to electronic payment options for goods and services, and the limited need for cash in rural areas, may “minimise the need to build an extensive network of rural cash points from the outset”, the IFC report concluded. With a large number of rural companies already turning to mobile banking for salary payments, which in turn is encouraging the development of a savings culture, this would play well into the hands of mobile banking service providers.

ADB: PNG’s rich-poor divide must be reduced to eradicate poverty and boost growth

ADB

PORT MORESBY, PAPUA NEW GUINEA (5 December 2012) – While Papua New Guinea (PNG) has maintained its position as one of the fastest growing economies in Asia and the Pacific in 2012, the gap between rich and poor is increasing.

“Remote and rural communities in PNG remain cut off from economic opportunities due to poor roads and lack of reliable, safe shipping services, as the gap between rich and poor grows wider,” said Xianbin Yao, Director General of the Asian Development Bank’s (ADB) Pacific Department said at a special year end ADB event in Port Moresby. “Economic growth must be accompanied by a narrowing of inequality to ensure future prosperity in PNG.”

The ADB event provided updates on ADB projects and programs in Papua New Guinea and discussed potential challenges and opportunities that will be faced by the PNG Government and development partners in 2013.

“ADB in partnership with the Government of Papua New Guinea is rehabilitating critical roads and bridges to help promote the safe and efficient movement of people and goods around the country which will result in improved service delivery,” said Marcelo Minc, Country Director of ADB’s Papua New Guinea Resident Mission.

Openness to trade will also be a key ingredient in PNG’s future prosperity, the forum was told. By connecting PNG’s local producers to domestic, regional, and global markets, trade will help fight poverty, boost the economy, raise living standards and improve access to basic services.

The forum heard,PNG’s private sector has more than doubled over the past seven years, largely due to the combination of sensible monetary and fiscal policies and structural reforms in financial services, telecommunications and aviation to boost business investment and encourage economic diversification.

The recently released 2013 National Budget foreshadows a significant scaling up of funding to priority sectors of health, education, law and order, and infrastructure. In line with its current PNG Country Partnership Strategy (CPS), ADB aims to work together with the PNG Government to implement its planned infrastructure investments (including support forroad, seaport, and airport rehabilitation and improvement; community water transport; and renewable power generation), private sector development, and regional cooperation. The CPS also commits ADB to helping the government deliver rural primary health services.

 ADB and the Government of Australia through the Microfinance Expansion Project is strengthening industry regulation and increase the capacity of Nationwide Microbank to deliver a wider range of financial services and products to rural areas, with a focus on lending to micro and small enterprises, and especially to women, who struggle to access credit and income-generating opportunities.        

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2011, ADB approvals including co-financing totaled $21.7 billion.

Agreement to extend Ok Tedi mine soon to be finalised

By Alex Heber in Australian Mining

Ok Tedi mine landowners in Papua New Guinea are expected to make a decision on the mine’s future by the end of the week.

Ok Tedi mine

OK Tedi Mining CEO Nigel Parker announced on Tuesday at the PNG Mining and Petroleum Investment Conference in Sydney that the agreement to extend the life of the Papua New Guinea mine will be finalised shortly, Australian Network News reported. Parker said seven of the nine community groups who represent 100,000 people downstream of the mine in the Fly River Catchment in PNG’s Western Province have already signed the agreement to continue gold and copper production for another eleven years.
Parker added that he expects the remaining two groups affected by the mine to sign this week.
"It has been an absolutely exhilarating process in the last three weeks," he said.
"I have personally signed on the company's behalf those agreements and the people are extraordinarily happy with Ok Tedi Mining Limited, with the continuation of the mine.”
Recently three MPs have called for the closure of the mine, citing the site poses both health and environmental risks, Parker said this seems to be at odds with what the communities want.
"The communities definitely wants the mine to continue, and are unequivocal about that," he said.
"I am sure the elected politicians have the communities at heart, and if they do get reports coming through of unidentified medical issues I am sure they would react, and possibly that is why they are reacting so much.”
Plans to extend the OK Tedi mine life were announced as PNG mining Minister, Byron Chan told the conference the O’Neil government plans to reform the country’s mining industry.
Chan said the PNG Government will ensure benefits from the mining industry will be delivered to the local people through a wide-ranging reform program.
"We want to make sure people are committed, companies are committed, everyone is committed to the project and not just holding licence and playing on the stock market," he said.
"There are some companies that have been playing that game for far too long."
The proposed strategy will halve the maximum size of exploration leases and reduce the limit the number of licences an individual can hold to 10.
Just on Tuesday Australian Mining reported the PNG government was attempting to dampen miners’ fears ahead of its mining tax review as concerns about increased nationalisation in the country surfaced.
PNG prime minister Peter O'Neill used the conference to speak to miners before implementing any changes to the regulations, stating that they will not be left out of negotiations during the review.
"It is not going to be out there to deprive the investors who are investing in these projects.
"We understand very well that they are there for a return for their shareholders," he said.
"But equally I am responsible for the return to my own people and my own country."