The six billion kina question

By Graeme Smith

To Treasury's consternation, during the course of the PNG election campaign Peter O'Neill announced he was negotiating a soft loan with China Exim Bank. It is worth in the region of K6 billion ($2.7 billion), with the potential for up to K10 billion to be drawn upon. It dwarfs the 2006 Soft Loan Facility of $375 million made to the Pacific as a whole.

Pro-opposition blogs have denounced the loan as 'sinister' and suggested that Treasury will be bypassed altogether. In the absence of any concrete details of the loan, which is currently being finalised, PNG's lively blogosphere has filled the vacuum. A thoughtful anonymous post on Keith Jackson's blog rightly points to the effect the loan will have on the ever appreciating exchange rate, which is set to face enormous upward pressure when Exxon Mobil's LNG project comes online.

Perhaps the greatest concern is that the loan appears to be fragmenting (even before it is agreed) into a set of smaller projects around diverse actors and local political interests, as noted in The Garamut.

Initially, the loan was specifically for a much-needed upgrade to the Highlands Highway. Projects now mentioned in association with the loan include a hydropower scheme, the infrastructure needs of Port Moresby and Lae, and even the upgrading of PNG's state-owned enterprises. One minister's 'shopping list' is said to be more than double the value of the loan facility.

To an extent, such balkanisation is a result of the Alotau Accord, an agreement reached between political groupings in the provincial capital of Milne Bay province that led to the formation of the O'Neill-Dion Government. Ironically, Milne Bay appears to be one part of Papua New Guinea that will not benefit from expenditure on 'high priority infrastructure projects'.

It will be interesting to see which dance partners appear on the Chinese side of the ballroom. Chinese aid officials privately concede that Chinese construction companies largely drive China Exim's concessional loans, the majority of which go towards infrastructure development.

In a recent Wall St Journal article, which curiously described PNG as 'an impoverished southeast Asian nation', Peter O'Neill maintained that the Chinese partners for the new loan would be 'Fortune 500 companies'. Success in accessing the 2006 Soft Loan facility came down to the political clout of Chinese contractors within China, and the political savvy of their PNG partners in lobbying the PNG legislature. The outlier was the choice of contractor for the $235 million PMIZ project, which involves the construction of a free trade zone and up to ten tuna canneries in Madang. The project is currently stalled in the courts. The Chinese contractor, Shenyang International Economic and Technical Cooperation Company, is a city-level state-owned enterprise (SOE) with no established presence in PNG. With less than 100 employees in China, it's unlikely to appear in the Fortune 500 anytime soon.

The choice of an inexperienced company for a complex project seems odd, but is in line with the practice of concessional loans being used to provide selected SOEs with overseas experience. With the majority of the top 20 Chinese companies in PNG listing their business as 'construction' (linked article is in Chinese), it's to be hoped that China Exim Bank calls on companies with experience in PNG, or similar countries. Papua New Guinea is no place for training wheels.

Graeme Smith is a Postdoctoral Fellow at the China Studies Centre, University of Sydney and a Visiting Fellow with the State, Society and Governance Program in Melanesia Program, ANU.
This article was first published on the 19th of December at the lowyinterpreter.org 

Comments

Post a Comment

Please free to leave comments.

Popular posts from this blog

HIGHLANDS FRAUD F*CKS RUNNING GOVERNMENT AGENCY,,,

Image
A Fraudster and unqualified person has been shortlisted for NEC submission for the position of CEPA Managing Director. The candidate in question is Jude Tukulyia. His academic credentials are subject to scrutiny. Further investigation is required to verify the authenticity and legitimacy of his qualifications, particularly the reported diploma in accounting, Bachelor of Laws, MBA from Divine Word and UPNG respectively. It is very suspicious and unprofessional  when the Minister for Environment Conservation and Climate Change, Hon Simo Kilepa, wrote to UPNG Vice Chancellor asking to confirm Jude’s questioned education qualifications. This very due diligence work is the core responsibility of the Public Service Commission and Department of Personnel Management. What authority does the portfolio minister have to write to the Universities? Dumbfounding indeed if one asks. Ulterior motives written all over the letter. This amounts to  Questionable Academic Qualifications of Mr Tukulyia.    
Read more

PNG, VERY RICH YET STILL A VERY VERY POOR COUNTRY

Image
by GARY MONDULAME Papua New Guinea (PNG), a nation blessed with abundant natural resources, continues to grapple with economic challenges that belie its potential wealth. The nation's economic narrative is a paradox—rich in resources yet burdened by poverty. The explanation for this paradox lies not only in economic mismanagement but also in deep-seated corruption that has permeated the political landscape since independence in 1975. Following its independence from Australia, PNG was entrusted to leaders who lacked a vision for a holistic national development. This absence of foresight is evident from the lack of long-term development plans that could have distributed the country’s wealth fairly across all regions and communities. Successive governments failed to establish foundational strategies such as building satellite townships or creating robust rural housing schemes. Instead, they resorted to short-term, reactive measures that did not foster sustainable growth. The nascent l
Read more

AUGUSTINE MANO PNG'S PREMIER CORPORATE CROOK

Image
by  MICHAEL J. PASSINGAN In a significant setback for Mineral Resources Development Corporation (MRDC), the Supreme Court of Papua New Guinea has dismissed the company's appeal to stop criminal investigations into its dealings with landowner funds held in the Pacific Balance Fund (PBF). The court ruled that MRDC's appeal was an "abuse of process" and ordered the company to pay costs of the proceedings. MRDC, a unit holder in PBF, had taken legal action against the National Court's decision to dismiss its case, arguing that the court had no jurisdiction to hear the matter. However, the Supreme Court disagreed and held that MRDC's appeal was nothing more than an attempt to interfere with the police's criminal investigative process. The court found that MRDC had no authority to conducted its own investigation into the activities of the Melanesian Trustee Services Limited (MTSL), the fund manager of PBF, and that its actions were in violation of the Trust Deed
Read more

BLIND LEADING THE BLIND, WHY THE PNG ECONOMY STILL SUCKS

Image
Elizabeth Genia, Acting Governor Bank of PNG (BPNG) by MICHAEL JOSEPH PASSINGAN The economy of Papua New Guinea (PNG) is at a crucial juncture. Despite some signs of recovery, the country faces several structural challenges that continue to impede its economic progress. The March 2024 Monetary Policy Statement from the Bank of Papua New Guinea sheds light on these issues, providing a comprehensive overview of the economic landscape and the policy responses being implemented to navigate through these turbulent times. In 2023, PNG's economy grew by a modest 1.4%, a significant slowdown from the 5.2% growth witnessed in 2022. This tepid growth is largely attributed to delays in major projects and ongoing economic issues that have not been fully resolved. The anticipated growth for 2024 is around 3.0%, buoyed by the resumption of production at the Porgera gold mine. While this marks an improvement, it remains subdued compared to the potential of this resource-rich nation. One of the mo
Read more

James Marape's Missteps Openly Exposed at Australian Forum

Image
by  MICHAEL J. PASSINGAN  In a recent event that highlighted the complexities of international diplomacy and governance, Papua New Guinea's Prime Minister, James Marape, faced a challenging situation during his appearance at the Lowy Institute in Sydney, Australia. The Lowy Institute, known for its role as an independent think tank focusing on international policy, particularly in the Asia-Pacific region, provided a platform for a candid assessment of Marape's governance. Following his formal address, Marape engaged in a dialogue with Dr. Michael Fullilove AM, the Executive Director of the Institute. Dr. Fullilove, a respected figure in public and international policy, scrutinized Marape's past promises and statements, contrasting them with the current state of affairs in Papua New Guinea (PNG). The discussion took a critical turn as Dr. Fullilove revisited Marape's 2019 speech at the same venue, where Marape had outlined his vision for PNG in a speech titled “A New Boo
Read more

MARAPE & PAITA ABOUT TO SIGN AWAY PNG GOLD

Image
By: Andrew Arthur Prime Minister Hon. James Marape and his planning minister Reinbo Paita are the parties behind the theft of all Papua New Guinea’s gold for the next 100 years! They have given approval for the STATE of Papua New Guinea to sign away all gold rights to an Australian paper company in Refinery Holdings PTE LTD. First, they have done the deal with a paper company even before there is a LAW that says they have the right to do the deal. We see how the real manipulation works out. Marape and Paita now need to get the law passed by Parliament. The law is before the Parliament to set up Papua New Guinea’s first National Gold Corporation. The National Gold Corporation Bill first surfaced in 2012 but successive Government of Sir Michael Somare and Hon. Peter O’Neill, in their wisdom, had refused to pass this Bill as there have been some sinister motives and constitutional issues associated with the Bill. The new bill will allow Refinery Holdings LTD PTE to own 70% of the National
Read more

A Call for Local Ownership and Fairness

Image
by JUSTIN PARKER In recent discussions surrounding the establishment of a gold refinery in Papua New Guinea (PNG), concerns have been raised regarding various aspects of the proposed project. Spearheaded by foreign investors, the initiative has sparked debates over ownership, exclusivity, tax concessions, underwriting, management rights, control over currency, legal protections, and historical failures. These concerns, if unaddressed, could potentially undermine the interests of PNG and its people, particularly the hardworking alluvial miners who form the backbone of the nation's mining sector. At the heart of the issue lies the question of ownership. The proposed ownership structure, favoring foreign investors with a substantial 70% stake, raises eyebrows, especially considering PNG's past experiences with failed ventures like seabed mining. Instead of ceding majority control to foreign entities, many argue that PNG should assert full ownership over the refinery. With the coun
Read more