PETER O'NIELL HAS RAPIDLY DESTROYED PNG
Low Oil Prices/Stockmarkets Share Prices Plummeting Further Exposing UBS Loan and impact on PNG’s economy
As Deputy Opposition Leader (DOL), I have issued several statements about the mismanagement of Papua New Guinea’s (PNG) economy since 2012 by the O’Neill-led government. I have revisited the reality of them in recent days following developments in Bulolo and the Morobe Province in delivery of services to the rural areas. As any elected member of Parliament regardless of party membership, it is our duty to make statements on our directions of PNG and what our future looks like under this PNC-led government. With Parliament member’s silence, they have deliberately exposed PNG to high debt spending with figures now stating that our economy is on the decline and rather than reduce DSIP’s/PSIP’s, they are now thinking of increasing GST, impacting heavily on our citizens; I will not be supporting the Bill, to increase GST/VAT!
One specific decision that O’Neill directed, which led toward our economy now in a recession is the illegal UBS loan. This O’Neill-led government is driving PNG’s economy into a country that could end up in a Depression and the economic facts out of the Half Yearly Fiscal Outlook demonstrate why I could not and do not continue to support this Prime Minister (PM). It is time for action, for parliamentary members to perform their duties and for the former leaders to live up to the legacies that they have worked years to build for the people and stand against the PM. There is a brighter future, but there is no brighter future with Peter O’Neill.
The first principal of an economy that is dependent on natural resource exports and a rural farming population is to understand the risks of the natural resources we possess in making any forecast on future revenue from those. We must support as a fundamental thing the rural development of our agricultural heritage.
These two matters have been completely overturned by the current PM and his government with their high debt spending. O’Neill is indulged by global resource giants looking to exploit PNG’s natural resources to the failure of our rural way of life and the better development and delivery of services to the rural areas. This is reflected in this week’s announcement that corporate tax looks to be reduced from 30% to 25%.
The economy is worse today than it was when Bill Skate was the Prime Minister. For those old enough to remember, it was not a good time in PNG economics and only hard saving decisions and rigid structures and governance halted PNG from becoming a failed state. The current PM obviously watched Bill Skate destroy the economy then and has thought that it can be done again and future Prime Ministers will clean up his mess sometime later.
PM O’Neill has ignored the announced economic figures currently facing PNG and with the international stockmarkets on a downward spiral this week, unrealised and volatile commodity markets are not something that the citizens and parliamentary members of PNG can ignore. Pre-spending LNG revenue and large borrowings that don’t grow PNG is not something that our country can ignore which O’Neill has, with his propaganda of lies and deception.
Our current PM needs to be held to account and the following detail demonstrates it is time for the people and the elected members of Parliament to start answering questions. This is what we know about the PNG Economy:
1. Treasury is out of funds and looking at how it can deliver the funding needed for the economy. Treasury is completely compromised from acting in best interest of the country as was seen by the charges laid against the current secretary Dairi Vele. Never before in PNG has a Secretary of Treasury been so engaged in economic mismanagement and personal greed than the PM appointed Vele. Hiding behind lawyers has been the hallmark of the economic downfall and corruption and so it is no surprise the Secretary has the same lawyers keeping him from being questioned and charged on matters that amount to pure indulgent corruption and economic suicide;
2. The Bank of PNG (BPNG) from the Governor down have been taking PM’s directives when they should be independent, since 2012. This has seen the Kina fall considerably making life even harder for the everyday citizen. Bank PNG has further supported the PM and claimed more growth and development forecasts only now having to scale those growth rates back without any application of acting independently and working to establish a smooth kina, foreign currency account balance and general watchful eye on the economy. Furthermore, BPNG has actually been assisting the PM in his game of deceit when they fixed a Kina to US dollar exchange rate outside of the market rates and at a rate that was worse for PNG;
3. Certain Ministers with the Prime Minister continue to spend either borrowed money or all the money that was meant to be applied to areas such as health, education and rural development. The current spending on the 40th Anniversary of Independence shows that the grandstand on the world stage is more important than assisting those rural areas crying out for assistance; and
4. The PM will announce while in India that PNG has signed some agreement that will make the resources and gas of PNG available to them and that this will right the wrongs of his economic mismanagement. We have heard this before from our current PM but it is just a marketing drive to keep people ill informed.
As Deputy Opposition leader, I do not believe O’Neill claiming that the economy is sound when figures and realistic situations contradict his lies. It is time for the employers and the people of PNG, to demand that the parliamentary members be accountable. Our current economic recession started with the UBS loan where in March 2014, O’Neill sponsored and pushed PNG, with the Treasury Dept and its Secretary, into a loan with UBS for the grand amount of USD1.2Billion or more than K2.4Billion to buy Oil Search shares (OSH).
Our PM stated that he did this to participate in resources development along with other lies, the NEC decision was quickly sponsored and then, the PM presented it to Cabinet. O’Neill stated that the Treasurer at the time, now the Opposition Leader Hon Don Polye, supported this but the evidence demonstrated that he did not and after he publicly criticised your decision, our PM sacked him alone, which meant that the rest of Cabinet supported or were forced into an illegal loan deal that was the best deal for the country.
This best deal, the illegal UBS loan for Oil Search shares has been a disaster and no one can find it in the mid year Fiscal economic update where the disaster of O’Neill’s investment is reconciled. As Deputy Opposition Leader, and on behalf of the Opposition, we will look to reconcile for our PM :
• The PM bought 149,000,000 Oil Search shares, but did not have any money to do that;
• The PM bought those shares by borrowing $1.2B where the share price was at $8.20. So the PM bought an asset with no savings, and borrowed on the first day more than the shares were worth as PNG also took on a bridge loan;
• The PM had to pay borrowing costs for the two year UBS collar loan which will mature in 7 months;
• The current share price as at August 24, 2015 is $5.81 and likely to fall further;
• The loss in value in Oil Search shares to PNG is $8.20 less $5.81or $2.39 a share;
• The loss total is AUD$356,000,000 or more than PGK700,000,000 to what the current deficit states.
PM O’Neill agreed to the interest being paid to UBS for this “best deal” loan. Investment banks don’t charge small fees or costs, so on research that interest is about 6% per annum in AUD or around 13% when converted into PGK amounts (or more with the falling Kina). Given these figures, the Interest that O’Neill agreed to pay was about $150M or a further K300 to K350M. It is common amongst bankers in Australia that UBS laughed all the way to huge profits as a result of the deal and that not one of the people connected with the UBS deal on the PM’s behalf, understood the specifics of the loan.
I understand that UBS with the falling outlook on Oil and the failure of the Secretary of Treasury to raise money to pay back the bridge loan, forced National Petroleum Corporation (NPC) to borrow more money. That money was borrowed from BSP and ANZ in PNG for USD520M or more than K1.2B.
So the investment decision O’Neill made, has a total current loss to PNG of around Kina 2.2 billion!
That loss for the citizens was put together by the PM and the Secretary of Treasury, along with Bank PNG and IPBC and some well connected advisors to the PM including Pacific Legal Group where Jimmy Maladina works, Anthony Latimer of Norton Rose, Lars Mortensen the business owner of Pertusio Capital with the Secretary of Treasury and some others like Adam Hills of PacWealth who was very close with the UBS person and Anthony Latimer.
The story of PNG being an investor was a fallacy that confused the people and the financial disaster O’Neill created is something he is trying to credit to all of the cabinet through NEC. When O’Neill made the statement he was taking the credit and he must equally be blamed for the UBS loan failing! The economics of the illegal UBS deal is one that confuses no one – PNG has lost more than K2B in one investment that the PM forced onto the people to pay for over the next two generations. It was the Prime Minister’s first major deal for PNG and it set the path to what we are currently facing, for our economy. Since then O’Neill has spent money that the country has not yet earned and this was the beginning of failures by O’Neill and his Government. The O’Neill-led government’s scorecard on economic and social management and opportunity for the PNG citizen is the worst in our 40 year independent history and ask that for the 40th Celebration, the Prime Minister give a present to all citizens by resigning. I know that won’t happen.
As Deputy Opposition Leader, I now call on former Prime Ministers and current members of Parliament and see that within 3 years, the current PM has rapidly destroyed PNG, its economy and its long term future.
The economy can be turned around for PNG and this can start with the O’Neill government bringing the Supplementary Budget forward quickly. Its well overdue to correct the financial mismanagement of the O’Neill-led government and economic accountability, modest spending within the means provided starting with basis services and rural development must be central to this Supplementary. Provinces should be able to develop their and work with the national government to deliver long term sustainable employment and growth through agriculture and natural resource projects transparently and accounting to the people.
Developing the LLG’s has made huge changes in Bulolo and in Morobe Province, and despite Morobe members having their party allegiances, they have put their people first for development and basic standards. This template can make PNG become the Pacific powerhouse that will deliver prosperity and a future for our people for decades to come. We need to remove the high debt burden imposed on us by the current PM, Peter O’Neill, and to start doing this, we need to remove the instigator of these debt burden and overspending. Over to you, Members of Parliament.
GOD BLESS PAPUA NEW GUINEA, IT IS NEEDED NOW
