Is the 100 Days – 25 Point Plan Practical and Achievable ?

By Francis Hualupmomi



It appears that the government has admitted that there has to be a macroeconomic discipline in rescuing the current economic situation. And it has put forward a 100-Days 25-Point Plan economic rescue package for the country based on the Alotau Accord II. But is this package realistic and achievable? Therefore, this article seeks to respond to this question.
The Current Economic Situation

Source: ADB 2017 Outlook https://www.adb.org/countries/papua-new-guinea/economy



According to the Asian Development Bank Economic Outlook (2017), the PNG economy has slowed down to 2.0 percent compared to the last four years (see the figure above). But it is predicted to pick up again at 2.5 percent by 2017 driven by mining and agriculture. The slowdown in the economy has been attributed to low commodity prices. This has increased inflation and unemployment, decreased foreign reserves, and affected the national budget.

Macroeconomic Landscape
It appears that the economic approach undertaken by the government over the last four has been one of an Expansionary. At the fiscal policy level, it has been driving the economy with high spending and borrowing at the backdrop of a decade long economic growth. The rationale is simple – utilise the surplus to expand the economy through infrastructure development which will, in turn, stimulate the economy. As a result of this approach, the economy has experienced an infrastructure boom in the economy as has been so far.
At the monetary level, it has been responding to the fiscal policy to ensure that the economy remains stabilised. It is important to note that in a country like PNG, monetary policy approach responds to fiscal policy to ensure stability. In so doing, it controls exchange rate and interest rates which tend to influence inflationary (inflation) behaviour.
Unfortunately, this macroeconomic policy has been affected by an unfavourable condition. There are two related factors, apart from others, that affect this behaviour. First, is that our commodities have been hit hard by low prices in the global market, which we have no control over. As a result of this price fluctuation, the revenue sources have been affected to sustain the fiscal capacity (budget). Because PNG is a resource-dependent economy that relies heavily on mineral and petroleum sectors, a price fluctuation in the global market will directly affect the economy in terms of growth and development. That is one of the reasons why the budget has been cut in certain social and economic sectors.
The second factor is that while the expansionary approach has been good it has not been managed at a sustainable level. What it means is that as the commodity prices slowly began to pick up again there has been a steady increase in the spending and borrowing. The reason is that there is an expectation that price will pick up again as in normal business cycle and sustain the expansionary approach. The downside of it is that it is quite difficult to predict the price fluctuation due to the complex interaction of market forces. As a result of this fiscal behaviour, the budget spending and borrowing has increased the deficit. However, the budget deficit can be improved and incrementally restored to normalcy through a sustainable macroeconomic policy package. Therefore, the next part will discuss this.

The Viability of the New Macroeconomic Rescue Package
The new Deputy Prime Minister and Treasurer, Hon Charles Able, has realised the downside of the expansionary macroeconomic approach. And he has proposed a 100-Days economic package to rescue the economy from further sinking. In essence, this is a 25-Point Plan which has been widely consulted with the private sector and led by some of the senior ministers and economic advisors. While this package may seem unrealistic to some critical commentators, in my view, it is a workable and achievable one.
The 100-Days 25-Point Plan intervention is based on these key strategic economic priority areas:


• Maintain Fiscal Discipline and Boost Foreign Exchange; Growing Our Revenues;
• Strengthening Our Economic Base;
• Improving Our Governance Record, and;
• Acting Strategically
.
First, maintaining fiscal discipline and boost foreign through the growing of revenues. Given the issue of the fiscal problem, practically maintaining a fiscal discipline in a prudent manner will help boost the foreign exchange in many ways. That means controlling and spending behaviour as compared to previous years. And this must be balanced with growing revenues through multiple sources. Incoming revenues must be prudently managed in a sustainable way. What is collected should be spent on strategic priority areas that can bring in higher returns.
In addition, the tax cut will be a balanced strategy. This is because no new taxes will be imposed on ordinary people despite declining revenues. However, this can be recovered through those who avoid or and evade tax. The country has been missing out on the billion dollar extractive industries through tax. For instance, a lot of companies in the mining, petroleum and logging industries have been avoiding or exempted from tax. As result of this, billions of Kina have been going out of the country. These lost revenues could be recovered and help support the budget.
Secondly, strengthening of the economic base is an innovative plan to invest in economic areas that have been ignored. This implies that the economic base must be diversified to boost the economy by way of revenues sources and invested in a lot of baskets to cushion economic surprises. Apparently, the focus on agriculture is pragmatic going forward. It has been a neglected billion dollar sector. Therefore, it is hoped that this will incrementally support and sustain the budget. 
Moreover, while the plan sounds practical, the governance aspect of it is fundamentally critical. The government has been widely criticised by the public for governance issues. And this approach is a noble plan to improve its credibility and international standing. In so doing, it will help its approach in prudently governing and managing the economy. Because investor confidence attracts investment and helps build the economy. Political governance is the strategic driver of economic growth and development at this time and in the long run.
Finally, these plans must be pursued in a strategic way. Every decision requires calculated available options to maximise optimal outcome. The government has chosen the best strategy therefore, it is Directionally Correct.



In conclusion, the economy has been affected due to the changing economic conditions and governing approach. And this has been evident in the current economic situation the country is facing. But this can be arrested through a sustainable macroeconomic approach. Therefore, the 100-days 25-point plan package is a practical one and needs to be incrementally governed and managed in a strategic way.

Francis Hualupmomi is a PhD Student in Public Policy in the School of Government, Victoria University of Wellington. He is a Political Scientist in the area of political economy of energy security, geopolitics of resources, international security, and strategic policy. Views expressed here are his own. francishualupmomi270@gmail.com 

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Election of PNG Prime Minister

By: PNG Political Commentary FB Page

There has been a lot of confusion and also a lack of understanding in regards to the election of the PNG Prime Minister. Therefore I’m here to give an explanation on the election of the Prime Minister to clear the polluted air. And that’s right the Prime Minister is elected! Not appointed! That’s one thing you all have to understand. Who elects the Prime Minister? All 111 members of Parliament take part in the election of the Prime Minister.

Now let’s get down to basics. First of all it is the law that regulates or outlines the Prime Minister’s election process. The PNG Constitution, Organic Law on the Integrity of Political Parties (OLIPP), and the Parliamentary Standing Orders (PSO) are important laws to take note of.

 

Invitation to Form Government

• It all starts with an “Invitation to Form Government” (Section 63(1) OLIPP). Under this particular provision the Electoral Commission, on the date of the return of the writs, is mandatorily obliged to advise the Head of Stead (Governor General) of the political party which has endorsed the greatest number of candidates declared elected.

• After receiving the advice from Electoral Commission, the Governor General then, in accordance with the advice of the Electoral Commission, invites that particular political party to form government.

• Note that the Governor General cannot act on his own accord but only on the advice of the Electoral Commission. Also the Governor General is not at this point appointing a political party to form government but rather inviting it to form Government. Like for instance, someone sends you an invitation to go to a birthday Party. If you receive the invitation it doesn’t mean you’re already at the party, you may go or you may not go.

At this time according to the latest reports, it is evident that People’s National Congress Party (PNC) has the greatest numbers of candidates that have been duly declared as elected in 2017. Therefore there’s no doubt that PNC would be invited by the Governor General to form Government.

parliament

Election of Prime Minister under PSO section 7

This is the stage where things become technical but I’ll try to be as layman as possible.

• The Prime Minister is elected by members of Parliament normally during Parliament’s second meeting. The first Parliament meeting is convened after the due date of the return of the writs and is usually for swearing in of members, the election of the Speaker, and other official business (s142(3) PNG Constitution, see also case of Haiveta v Wingti & others [1994] PNGLR 197) .

• By virtue of section 63(4) of the OLIPP and section 7 of the PSO, the political party that has received the invitation to form government from the Governor General has the privilege of nominating a member of parliament to become Prime Minister. Parliament would then vote after the nomination and the nominated candidate would have to muster a simple majority in order to be elected and declared Prime Minister.

• If the candidate nominated by the invited political party does not receive a simple majority than Parliament would have to resort to section 7A of the PSO for the election of a Prime Minister.

• Take note that the procedure under section 7A of the PSO is only followed if the candidate nominated by the invited political party fails to secure a simple majority of votes to become the elected and declared Prime Minister.

• Simple majority should be around 50% of the total members of parliament. So 50% x 111= 55.5 round it up you get 56.

Election of Prime Minister under Section 7A PSO

• The Speaker of Parliament calls for nominations.

• At this stage the floor is open to all members of Parliament to make nominations.

• Under this process the privilege of nominating a candidate
for the Prime Minister’s seat is not only given to the party invited to form government but also other political parties.

• Members of Parliament can nominate more than one candidate for the Prime Minister’s seat under this process.

• A preferred nominated candidate for Prime Minister does not need to reach a simple majority of votes from members of parliament. The preferred nominated candidate only needs to receive a majority of votes in order for him to be declared as the duly elected Prime Minister (PSO section 7A(11) ).

If PNC and its coalition partners increases to 56 or more, most likely we’ll see PNC’s Party Leader retain his seat as Prime Minister and the formation of a PNC coalition government. On the other hand if the Eastern Alliance Camp increases we might see a change of government. Remember this is Papua New Guinea, so expect the unexpected…

Immediate Priorities to Prepare for 2017 Elections 

By: Solomon Kantha 
Recommended to Electoral Commissioner in 2015

IMMEDIATE PRIORITIES TO PREPARE FOR 2017 ELECTIONS 

 

a) Improvement of Electoral Roll 
The electoral roll will be the key priority and will obviously require a proper, thorough and effective updating. The Electoral Commission will need to work closely with political parties, candidates, elected leaders, civil society and voters to get the buy-in to ensure a clean and updated electoral roll. It has to do more than just administering elections. Roll management needs to be configured so that any re-enrolment, updating and verification is conducted with centralized oversight, auditing and controls. More importantly, a dedicated roll management unit within the Electoral Commission headquarters must be set up and supported by the government as a specific program. There would also need to be transparent recruitment and performance management and regular auditing of province, district, and ward-based level staff.

 

Reasonably low-cost technology can compile (in the field) a digital Voters’ Roll that includes both photograph and fingerprints. Consideration will be given to requesting this technology and to trialling it in priority areas.  

 

b) Introduction of Voter Identification Card 
A voter ID card must be implemented for the 2017 elections and is the single most important device that can transform the election in the polling process by eliminating double/multiple voting, voting using ghost names, under-aged voting, impersonation and other aspects of electoral fraud. A basic voter ID card can be introduced with a photograph and finger print basic security feature and issued to every eligible registered voter. I have observed the use of a voter ID card in elections in other countries in the region and it has tremendously facilitated a successful election. The voter ID will have the basic particulars of a person such as an ID number, full name, sex, date of birth, province, district, electorate/constituency, and village. The voter will therefore vote in the electorate that appears on his/her voter ID. Apart from its use once every five years, the ID card can also serve the purpose of other identification for ordinary citizens to access banking, travel, pension, business and other services. The voter ID card will be reissued only if the person changes electorate or changes name in the case of a married female voter.  

 

A Voter ID Unit will be established to work on the voter ID card system and kick start the process for 2017 elections. A bid process can be advertised with the contract awarded to a consultant company to set up the IT infrastructure for the Electoral Commission to administer, register and process all voter ID cards. The process of the production of voter ID cards will be owned by the Electoral Commission. Once an eligible voter is registered the particulars of the individual will be automatically transmitted to the central system in the headquarters to process the person’s voter ID card.  

 

c) Improvement of Polling Process 
The polling process can be improved with the use of a voter ID card. An eligible voter will be required to produce their voter ID card to a polling official before casting their vote. In the event that a person presents their voter ID card but their name is not on the electoral roll, the person can still vote given the validity, authenticity and authority of the voter ID card. If the person for some reason does not have a voter ID card but their name is on the roll, the person can still vote provided that the person provides a valid and genuine form of identification such as a driver’s license or PNG passport. If the person’s does not have a voter ID card and their name is not on the roll, the person cannot vote. The use of the voter ID card against the roll will help to significantly reduce the number of eligible voters not voting if their names for some reason are not on the common roll as seen in the recent election.  

 

The process by which the indelible ink is used to mark the finger of a person after voting will also be changed. A person will have to dip their finger at least half-way into the ink instead of just a line on the finger tip. An appropriate ink for that purpose will be used and can last up to a month on the finger. This process will eliminate the practice of removing the indelible ink by using acidic fruits, bleach or other chemicals. 

 

d) Improvement of Counting Process 
Given the recent experience with the significant mistrust in the counting processes in the last election that led to a lot of delays, a regional/provincial rotational system of counting officials will be developed whereby counting officials from one region (e.g. New Guinea Islands) will be moved to another region (e.g. Momase region) to take charge of counting. All counting will be undertaken by officials not originally from the province so that the integrity of the process is respected by all parties/candidates of the particular electorate which the counting is taking place. A volunteer registration system can also be developed to recruit individuals in the provinces to be involved in the rotational system of the counting process, provided that these individuals have a neutral standing in the community. These are options that can be considered to improve and instill trust in the counting process.  

 

e) Promoting Minority Rights and Rights of Vulnerable Groups 
An awareness raising campaign would be conducted to promote the political rights of minority groups (women, people living with HIV/AIDS and disables), vulnerable communities (those affected by climate change, natural disaster or ethnic conflicts) including PNG citizens living/working abroad to participate effectively in the elections. The rights of minority and vulnerable groups will be reflected in legislation and/or policy. For the elections to be a truly democratic process, these groups of citizens need to be empowered to participate in the election process. To promote the rights of these groups a Goodwill Envoy who may be a popular international, regional or local musician/band or artist can be selected and sponsored for various awareness events leading up to the elections. 

 

 

MID TO LONG-TERM PRIORITIES 

 

f) Legislative Review 
The Organic Law on National and Local Level Government Elections is outdated and needs a thorough review to embrace the changes in society, evolving political culture and the needs and issues of this present time. The review will allow the Electoral Commission to effectively administer elections. A legislative review should consider issues such as: (a) political rights of citizens abroad, and minority and vulnerable groups in society; (b) introduction of a biometric and/or basic voter ID Card system; (c) the procedures of postal voting to allow citizens outside of country and those absent during election period from their electorate; (d) clearly defined roles of Returning officers, Assistant Returning Officers, Presiding Officers and Scrutineers; (e) a swift and inexpensive process of decision-making by Courts on election disputes and petitions; (f) enhancing powers of the Electoral Commission and; (g) setting reasonable limits to campaign expenditure. These are few of the major issues but there is a critical need to review the entire legislation so that it reflects the changes in the social, economic and political dynamics of the PNG. The review may also embrace some of the points discussed below in this proposal. 

 

g) Counting and Declaration of Election Results 
This process is proposed to be reflected in the legislative review where after the counting of all ballot boxes the provisional election results will be immediately provided by the Returning Officer to all candidates and political parties in an electorate. The candidates/parties will be given 72 hours to make a claim or appeal against the provisional results. If there are any claims/appeal against the winning candidate or provisional results, a special court much like the Court of Disputed Returns in each province will convene immediately to make a final decision within 7 days subject to evidence provided. After the Court’s decision the final results of the election will be officially tabulated and announced. This process will take not more than a week and the court’s decision is final.  

 

This process will significantly reduce the waste of resources, time, money and effort incurred by the State, aggrieved and declared candidates through the Court of Disputed Returns and allow the winning candidates to assume their mandates and immediately move on with the responsibilities in their electorate, province and at the national level.   

 

h) Out of Country and Postal Voting 
The Organic Law on National and Local Level Government Elections allow for the use of postal voting by PNG citizens living/working abroad however this process has never been implemented since 1964. Postal voting for citizens living abroad will be piloted in at least two countries (Australia and New Zealand) where there are a significant number of PNG citizens residing. Particular Diplomatic Missions of the country abroad can also be identified as regional postal voting locations (e.g. Brussels in Europe, Singapore in Asia, Washington DC in Americas and Canberra in the Pacific) whereby votes of citizens in that region can be sent to these Missions to forward on to the Electoral Commission. The Organic Law on Elections will be reviewed to have specific provisions on the eligibility of citizens abroad, the required proof of citizenship and the electorate by which they will vote for to allow citizens abroad to exercise their democratic and political rights. Electoral Commission will be working closely with the Department of Foreign Affairs and PNG Immigration & Citizenship Service Authority to implement this initiative.  

 

Postal voting will be conducted and postal ballots received by the Electoral Commission a week prior to the nation-wide polling schedules. An electoral officer will be seconded to PNG consular offices overseas in the period of postal voting and will be responsible for administering the process. The process of postal voting will also be implemented for those citizens that may be traveling during the election period, those that will be engaged in providing security (e.g. Police and Defence personnel) during elections and those that are sick, disabled or unable to vote in person for reasons beyond their control.    

 

i) Defining the role of election officials 
The Returning Officers, Assistant Returning Officers, Presiding Officers and Scrutineers play a very important role particularly in the counting process and their roles need to be clearly defined in legislation if not in policy. Experience in previous elections as well as the last election has shown that the counting process can be easily hijacked if the roles of these officers and their powers are not clearly defined and demarcated. While scrutineers in particular play a vital role in ensuring that ballot papers are clearly allocated and votes counted they should never overpower the Returning Officers and disrupt continuity of counting process especially in light of timeframes that are set for the declaration of results and return of writs. Nevertheless, clear processes and procedures must be in place for the grievances of scrutineers to be effectively taken into consideration. The legislation and/or policy would be revised to improve a clear coordination and understanding of roles and responsibilities between these officials.  

 

j) Enhancing the enforcement powers of the Electoral Commission 
The legislative review will also take in account and enhance the powers of the Electoral Commissioner to suspend elections or polling and counting processes if there is a critical security risk and widespread violence that affects or prevents citizens from freely, fairly and safely participating in the election process. The people must learn to respect democratic election processes and until they respect that process they will not have a representative in Parliament. The Electoral Commissioner must have the powers to put on hold the election process in an electorate or province indefinitely in the case of widespread violence and electoral fraud until the people come to a compromise to guarantee a free, fair and safe election.  

 

In the elections conducted over the years the Electoral Commission has never taken a strong stance in prosecuting cases of electoral fraud and abuse. Candidates can sign up to the rules of “fair play” and to provide speedy and effective processes for dealing with breaches of electoral laws. Accepting the need for independent scrutiny by the Courts, the Electoral Commission should be able to act as Plaintiff, not just as Defendant, in enforcing electoral law. Consideration will be given to establishing a special “Election Tribunal” with election and legal expertise to consider breaches of the electoral laws during elections. If the Electoral Commission had reliable evidence of a person breaching the campaign laws (for example, bribery) it should apply to remove the Candidate from that election. If the vote had already taken place, the first preference would be removed just as if that candidate had been eliminated, and other preferences re-allocated. The new message needs to be: breaching electoral rules is not to your advantage. The old message effectively was: anything that improved the chances of winning was acceptable. 

  

k) Limits on campaign expenditure 
To prevent domination by only the wealthiest in elections, many countries have reasonably effective limits to campaign expenditure. Without clear rules spelling out acceptable expenditure and banning “traditional gifts”, such limits would be completely unviable in PNG. All politicians and indeed their communities should share an interest in setting effective limits on campaign expenditure. I accept, however, that enforcement is a major problem. But legislation can empower the Electoral Commission to establish such limits by Regulation, when it deems that reasonable enforcement possibilities exist. 

 

l) Candidates to declare assets 
It makes little sense to clean up elections without linkage to corresponding sanctions in public office to stop the cycle of corruption. Obviously there are existing processes in place in this regard, but consideration could be given to requiring all Candidates (not just elected MPs) to submit declarations of assets to the Ombudsman as part of the nomination process, and to provisions which would mean that any false declaration rendered the person ineligible to stand for a defined period. The purpose of the recommendation is firstly educative (in reminding candidates that they embark on a process where their overall integrity is on the line) and secondly to lay the basis for possible later investigation if relevant. Playing by the rules should not be just one option in a game of winning at all costs – it should be a condition for being a candidate or holder of public office. 

 

m) Abolishing by-elections 
The legislation will be reviewed to as much as possible allow the abolishment of by-elections. Consideration will be given to abolishing by-elections under certain conditions. Under First Past the Post (FPP), “winning” candidates routinely received less than 10% of the overall vote. With three votes under LPV, there is solid evidence that a far wider democratic mandate would have been won by even losing candidates than was often secured under FPP. It would, in my view, be perfectly legitimate to consider requiring the Electoral Commission to complete the count in a manner that would allow the reallocation of votes in the event that a person lost his or her seat. Careful attention to detail would be necessary, including possibly requiring a by-election in the event of the death of an MP or under extraordinary circumstances the voluntary resignation of an MP. Other factors would include situations where a person was removed because of, say, mass multiple voting that threatened the integrity of the ballot, that person’s entire vote would be excluded, including all three preferences (because of the fraud). But in principle, it should be possible to allow the reallocation of votes of a person who lost her or his seat, to establish a successor with the next highest mandate. This alone, would save millions of Kina and allow the Electoral Commission to concentrate on the Roll between elections.

New Fiber will drop Internet Costs

By: Jonny Andrews
Papua New Guinea felt the pinch of congestion when Telikom Fiber in Madang went down again for the 2nd time in just many months on Saturday.
The PPC-1 link from Madang to Guam has 10Gbps capacity however, that link has been impossible to get to from Port Moresby.
From Tiare gateway, you would be routed on a microwave link to Mt Hagen, from Mt Hagen you will then go down to Lae and from Lae to Madang. That HCP Microwave link in itself has shown signs of being unreliable and that put furthur stress on existing Fiber link APNG2.
Since the break in PPC-1 Fiber in Madang, all international traffic are routed to APNG2. This has caused congestion and slow internet everywhere on Telikom Network.
Just before the break, DataCO and Telikom announced a new working relationship. This relationship is being investigated by ICCC.
One wonders why DataCO have for so long shied away from putting in a New Fiber Optic between Port Moresby and Australia. This would have solved the bottle-neck issue for Papua New Guinea and will significantly drop internet costs for users.
Acquiring of the New Fiber Optic Cable is no longer a must…it is now a NEED and all efforts must be made to make this possible.
PNGDataCo
———————————————————————
New Fiber Optic Cables pursued for PNG
 
Post-Courier – Thursday, June 8, 2017
BY MELISHA YAFOI
 
PNG Data Co is now firming up on one of its two options to connect PNG to the world using a new submarine cable to be built.
 
Managing director Paul Komboi said that the government has now reviewed previously preferred options including ICN-2 and have now tasked DataCo to provide two options that will be able to connect PNG from Port Moresby to Australia.
 
Mr Komboi said they are now pursuing a new cable option from Port Moresby down to Sydney, Australia.
 
“We currently do have an optical fibre submarine connection called the “APNG-2” submarine cable from Port Moresby to Sydney, but it’s very limited in capacity, expensive and very unreliable so that’s the problem and we need to fix that problem.”
 
“Our APNG-2 Submarine cable down to Sydney will reach its end of life very soon I think another two years or so is left for its operation and service. We need to replace this APNG-2 submarine cable before the cable stops operating. I think basically, it’s a requirement for PNG to have a new optical fibre submarine cable with modernized and futuristic technology and capability given the dynamic nature of the ICT sector and industry.
 
“It’s a necessity now for the country to have a cable connecting us to the the worldwide information network to allow for accessibility to information, markets and knowledge. Reliable, a lot of capacity; that is what we need,” he said.
 
By building this new optical fibre submarine cable, we will introduce modernized communication technology, which will enable us to lower the pricing of data services, provide super high capacity and speed, as well as proven reliability and better service quality to meet the country’s current and future demand.”
 
He added that it is an important infrastructure like electicity and water, and the government’s plans and decision to invest in this high-capital modernized infrastructure is not being ambitious but rather necessary”.
 
“It is a necessity for the government to invest in such infrastructure and so, all we need to do now is manage them effectively and efficiently for the benefit of our people and the whole latest restructure e is about better managing those high-cpatial modernized infrastructure assets of the state and people..
 
“We have firmed up on one of our options. We are going into details discussions, negotiations and plans now such as the arrangements for who will be the actual vendor to supply and install the cable and also firming up on pre-sales of the capacity on who will be using the new fibre optic submarine cable. We are expecting by mid-June to end of June to be able to make some joint announcements with our partners to be able to launch this project officially,” he said.
 
Mr Komboi affirms that there’s also been positive response from Australia to assist them with the lending arrangements, adding that the appetite to have a new optical fibre submarine cable between Port Moresby and Sydney is there but they are looking at who they should partner with and under what structure and terms.
 
“There are some things we are still discussing and negotiating at the moment at the background, and we are not yet at the liberty to share unless every party has agreed to the terms and conditions.
 
We are yet to give a name to this new project and will announce it once all the requirements are met and parties are in principle satisfied,” he said.
 

Moody’s downgrades Papua New Guinea’s rating to B2 with stable outlook

Global Credit Research – 25 Apr 2016

Singapore, April 25, 2016 — Moody’s Investors Service has today downgraded the Government of Papua New Guinea’s (PNG) foreign currency and local currency issuer ratings to B2 from B1. The outlook on these ratings is stable. This concludes the review for downgrade initiated on 25 February 2016.

The key drivers of the downgrade are:

• Strains on foreign currency reserve adequacy due to heightened balance of payments pressures that will continue over the next two years; and

• The persistence of unfavorable domestic funding conditions for the government that have increased refinancing risks and eroded debt affordability.

The stable outlook is based on Moody’s view that PNG’s medium-term economic growth prospects remain robust, although lower commodity prices and the consequent fiscal and economic adjustment will weigh on growth outcomes in 2016 and 2017. In addition, a reduction in fiscal deficits has helped to slow the rise in government debt, which remains low among similarly-rated countries.

While the review was prompted in part by the impact of structurally weaker prices of oil and related commodities on PNG’s economy and fiscal accounts, we have determined that the continuation of the pressures on government and external liquidity first flagged when we assigned a negative outlook in 2015 were more relevant.

 

RATINGS RATIONALE

DOWNGRADE TO B2

First driver: Continued deterioration in foreign currency reserve adequacy

PNG’s gross foreign currency reserves have fallen sharply to $1.69 billion at end-2015, down from a peak of $4.26 billion at end-2011, reflecting the continuation of the balance of payments pressures that prompted our assignment of a negative outlook on PNG’s rating last year. Liquefied natural gas (LNG) production drove the large rise in exports and the restoration of the current account surplus since 2014. However, this has failed to stem the deterioration in PNG’s external payments position as cross-border debt servicing and other demands for foreign currency as represented by the large financial account outflows have overwhelmed the supply of hard currency available to the central bank, the Bank of Papua New Guinea (BankPNG).

BankPNG has intervened to stem a disorderly adjustment of the exchange rate, and placed the costs of this intervention at $828.5 million in 2015 alone. It also introduced exchange controls last year that effectively rationed foreign currency.

Although production at the country’s largest gold and copper mine resumed in March 2016, associated export receipts will only mitigate, not eliminate, the ongoing balance of payments pressures. Reserve adequacy has weakened accordingly, with our estimate of short-term external debt repayments rising to over 140% of the stock of foreign currency reserves as compared to 83.7% in 2014. Moreover, the challenging environment for external liquidity has fed back to the real economy through weaker sentiment, which is already suffering from the decline in global prices for PNG’s commodity exports.

Second driver: Pressures on the government’s liquidity position due to unfavorable funding conditions

Declining fiscal revenue and constrained domestic financing conditions have weakened the government’s liquidity position. Although commencement of LNG production supported economic activity in 2015, it has not benefited revenue to the same degree, because of lower LNG prices which track oil price trends with a lag of a few months. We estimate revenue as a share of GDP fell to 17.1% in 2015, the lowest level in at least a decade, and project a further decline in this ratio this year.

Wide deficits in recent years have led to higher interest rates for government securities, as domestic investors have lowered their exposure to sovereign risk by either shortening duration or limiting their holdings of government debt. Refinancing risks have thus risen as the proportion of domestic market debt comprised of short-term obligations has increased, and debt affordability has deteriorated rapidly on account of the higher interest rates demanded in primary auctions. Short-term debt now accounts for 48.1% of total domestic market debt as of end-2015, while interest payments as a share of revenue—our preferred measure of debt affordability—has nearly doubled to 9.8% in 2015 from 5.3% in 2013.

Central bank absorption has offset somewhat the decreased local appetite for government bonds—BankPNG held 21.0% of domestic market debt as of September 2015, up from 7.1% two years earlier. Nevertheless, poor funding conditions have led the government to curtail spending, further weighing on economic growth.

 

STABLE OUTLOOK

The stable outlook balances the weak near term growth outlook against more robust economic prospects over the longer-term. In particular, the successful implementation of the PNG LNG Project has demonstrated operational efficiencies, profitability, and a relatively low cost structure, which enhance PNG’s competitive advantage in extractive industries, and bolster the prospects of similarly large projects, even against the backdrop of structurally lower commodity prices. Such projects include a potential expansion of the preexisting PNG LNG Project, an entirely new development called the Papua LNG Project, and the Wafi-Golpu gold mine. While we do not expect material progress on the implementation of these projects until late 2017, the resulting upturn and stabilization in growth will, in our view, alleviate external and fiscal pressures from escalating. In the interim, however, Moody’s expects the government’s fiscal consolidation efforts to maintain low government debt levels compared to similarly rated peers, while funding conditions and external liquidity will remain tight. An upturn and stabilization in growth and exports will, in our view, keep external and fiscal pressures from escalating. In addition, Moody’s expects the government’s fiscal consolidation efforts to keep government debt levels low as compared to similarly rated peers.

 

WHAT COULD CHANGE THE RATING UP

Moody’s would consider upgrading the rating if increased non-debt creating external inflows lead to a material build-up in foreign currency reserves and improve reserve adequacy. A sustained improvement in the government’s fiscal and liquidity position accompanied by the restoration of the trend in debt consolidation would also be credit positive. Over the longer term, enhancements to potential growth and government revenue through the development of large projects, such as potentially significant additions to LNG and gold production, would also lead to upward pressure on the rating.

 

WHAT COULD CHANGE THE RATING DOWN

Triggers for a further negative rating action include: (1) a reemergence of wide fiscal deficits that lead to a rapid rise in government debt; (2) a worsening of growth prospects that could ultimately weigh on fiscal and debt sustainability; (3) a further decline in foreign currency reserves.

 

COUNTRY CEILINGS

Moody’s has lowered Papua New Guinea’s long-term foreign currency (FC) bond ceiling to B1 from Ba3 as well as its long-term FC deposit ceiling to B3 from B2. PNG’s short-term FC bond and deposit ceilings remain unchanged at “Not Prime.” These ceilings act as a cap on the ratings that can be assigned to the FC obligations of other entities domiciled in the country.

  • PNG’s local currency bond and deposit ceilings remain unchanged at Ba2.
  • GDP per capita (PPP basis, US$): 2,470 (2014 Actual) (also known as Per Capita Income)
  • Real GDP growth (% change): 9.9% (2015 Actual) (also known as GDP Growth)
  • Inflation Rate (CPI, % change Dec/Dec): 6.4% (2015 Actual)
  • Gen. Gov. Financial Balance/GDP: -3.9% (2015 Actual) (also known as Fiscal Balance)
  • Current Account Balance/GDP: 20.9% (2015 Estimate) (also known as External Balance)
  • External debt/GDP: 69.2% (2015 Estimate)
  • Level of economic development: Low level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 20 April 2016, a rating committee was called to discuss the rating of the Papua New Guinea, Government of. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have not materially changed. The issuer’s fiscal or financial strength, including its debt profile, has not materially changed. The issuer has become increasingly susceptible to event risks. An analysis of this issuer, relative to its peers, indicates that a repositioning of its rating would be appropriate. Government and external liquidity risk have increased. Other views raised included: The issuer’s institutional strength/ framework, have not materially changed.

The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2015. Please see the Ratings Methodologies page on http://www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.

 

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on http://www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see http://www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on http://www.moodys.com for additional regulatory disclosures for each credit rating.

 

Christian de Guzman
VP – Senior Credit Officer
Sovereign Risk Group
Moody’s Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Less Money, Less Vote Buying

By: Political Observer

Reports received from 2017 NGE candidates across the country is that they are running out of money for their campaign. It seems most are wishing and hoping that June 24th arrived so ends the campaigning.

We still have 5 weeks to go and most Political Parties and Candidates have run dry.

Kerengu Kua stated to ABC that this has several implications for PNG democracy.

However, the alternative viewpoints also is that, this will see a test of candidates who heavy rely on “Vote Buying” to change their strategy and start using “development policies” to win votes.

Most candidates dont have a practical Political Platform and the lack of money in spending will put “Spot lights” on alternatives which they can offer rather than “vote buying” and big ceremonies.

Strong Political Platforms will be the Big Winner this election..


Papua New Guinea’s cash crunch saps colour from election campaigns

 

Tough economic times are affecting Papua New Guinea’s normally colourful election campaign.

Candidates and parties are crying poor, and that has meant the normally feverish campaign is more subdued than expected.

The leader of the PNG National Party, Kerenga Kua, said that has implications for PNG’s democracy.

Kua
It’s election season in Papua New Guinea, which means it’s time for colourful campaigns, rallies and outlandish promises by candidates.
“There is less colour, less movement, and that’s not good, because you need to have some level of activity for educational purposes,” he said.

“The messages from candidates need to go out for the people. To do that, they need money and they don’t have money.”
Voters usually expect campaigns to be a period of uncharacteristic generosity from their incumbent politicians and intending candidates.

In the past, many have received inducements to support particular candidates, such as money, food or alcohol.

“They think the candidates will give them money, they will take the money as something they always wanted and they use the money and they cast their votes,” she said.
“They’re not thinking about the future of how they will enjoy the benefits of the government doing some good things for them, because they need money now.

http://www.abc.net.au/news/2017-05-22/pngs-cash-crunch-saps-colour-from-election-campaigns/8544274?pfmredir=sm

 

 

DEVELOPMENT IS ACCORDED TO POPULATION SIZE – O’NEILL

9th May 2017

Mr O’Neill said when his government came into office in 2012, one of his first meetings was with Governor Powes Parkop who put forward many of NCD’s expansion plans that were never implemented by the previous government.

Mr O’Neill said the previous government had so many expansion plans for city roads including basic services for its city residents, which never eventuated into tangible results.

However, everything changed due to the hosting of the SP Games in 2015, which became a game changer.

STH1
O’Neill cuts the ribbon to Officially Open the Sir Ruben Taureka Highway

Mr O’Neill PM described the project at the time to be three years behind schedule that had ailing infrastructure and could not even host an international event in the country. He said his government took a bold step and made a decision that was against all advice in cancelling the event.

He said it was an opportunity for the national government to deliver the infrastructure for a growing city like Port Moresby, which needed world-class facilities which overtime became a reality.

“Today you have stadiums you can be proud of that is comparable to stadiums anywhere in the world. You simply forget when you go and watch a rugby league match at PRL and forget where we came from. And you take it for granted that these some of the infrastructure weren’t even there a few years back. You forgot the hard decisions and hard ships we had to take in order for everyone to enjoy the facilities. Even our roads now are built to world class standards,” he said.

Mr O’Neill said people were complaining about the government spending too much money in Port Moresby and reminded everyone it was the government’s prerogative to plan and spend money that will bring much needed services to people, which was based on the size of the population in any given location.

“There is no other formula when you have a population like one million people living in Port Moresby city, offcourse you need to upgrade its infrastructure. I want to build a four – lane road in Pangia District but we only have 120,000 population there, so it does not make economic sense to build a four-lane highway there,” he said.

The Prime Minister said developments throughout the country concentrated on areas with the largest populations such as Lae, Mt Hagen and Kokopo.

“We fixed Lae city from a pot hole city to a cement city. We built a four-lane highway from Lae City to Nadzab. We are also building a four-lane highway from Kagamuga to Mt Hagen and onto Koltiga. We are also upgrading all the roads in Kokopo, its because of large portion of Papua New Guineans go and get services there.” he said.

World Bank to assist PNG Sovereign Wealth Fund setup

May 14, 2017 – By ROSALYN ALBANIEL

THE World Bank will be assisting the Bank of Papua New Guinea establish PNG’s Sovereign Wealth Fund Secretariat.

This was announced last Friday by BPNG governor Loi Bakani during an update on the matter.

“We got a visit from the World Bank and have got someone on the ground to help us set up that office. This is the administrative secretariat reporting to the board of the SWF,” Mr Bakani said.
Mr Bakani said there had been some issues on the appointment of the board of directors for the fund but said this is being handled by accounting firm KPMG under the directions of the Department of Treasury.

“As far as the secretariat is concerned, we hope to have someone very experienced on the ground to set up the office that will coordinate work here and we will set up the office once everything is in order,” he said.

On the issue of revenue flow into the fund, he said the main providers would be companies in the mining and petroleum sector including the LNG projects.

In the case of the multi-billion kina PNG LNG project, he indicated that this was likely to happen round about 2021, 2022 onwards.

“The national budget is framed around that time. This is when government expects the budget will also be balanced.”

“This is when government expects the PNG LNG will start paying taxes.”

“As it is, we have not got any foreign exchange from this project.”

“Until and unless the accelerated depreciation ends, which is seven to eight years, is over since first export in 2014.

“This is when we will see some taxes. It is still a long way away,” he said.

Releasing more land key to increasing Papua New Guinea home ownership

By: Kevin McQuillan
3rd May 2017

Demand for housing in Papua New Guinea is strong but there is a shortage of supply, according to the latest survey by Hausples, a Port Moresby-based real estate company.

The Hausples.com.pg 2017 survey shows that working class Papua New Guineans are beginning to understand the value that home ownership brings to their families and they are increasingly investing in their own properties, according to CEO and founder, Mat Care.
‘Despite Port Moresby’s high prices, most people (62 per cent) feel that now is an opportune time to purchase a property,’ he tells Business Advantage PNG.

According to a report by the ratings agency S&P Global, Banking Industry Country Risk Assessment: Papua New Guinea, average growth in PNG property prices, adjusted for inflation, has been about 8–11 per cent over the past four years.
‘New constructions in PNG’s housing market are largely funded through direct foreign investment or superannuation funds, with little leverage and little direct participation from the banking sector,’ the report says.
‘We estimate around 15 per cent of the banking system’s lending exposures are to property and related services, remaining unchanged in recent years.’

 

Supply

Mat Care ‘firmly believes’ that more effort should be made to increase supply, which he says will bring house prices down and increase access and affordability.
‘Housing is a critical factor in the continued development of PNG,’ says Care.
‘The country’s urbanisation rate of 12 per cent is incredibly low by global standards. Southeast Asia’s least urbanised country is Cambodia at 24 per cent.’

‘It is critical for landowners and the government to seek novel and fair ways to release more land.’

Care says that, despite the low urbanisation, the survey confirms the ‘very substantial housing shortage’ throughout the country.
‘Property development on customary land with long-term, 99-year leases, is becoming more common within the NCD [National Capital District] and Central Province,’ he says, citing Edai Town as a successful example.

edai
Standalone House in Edai Town

‘Whether customary land should be converted to freehold land is a policy issue for the government and the existing customary land holders,’ he says. ‘Potentially, a voluntary system of conversion, subject to appropriate compensation, could be considered.
‘Regardless, it is critical for landowners and the government to seek novel and fair ways to release more land for much-needed housing.’

 
BSP inquiries increase

Kanawi Chapiu, Bank South Pacific’s (BSP) Home Loan Coordinator, says home loan inquiries have risen. Potential customers show interest when they see others successfully buying their own house.
Since its inception in 2014, BSP has approved 534 home loans valued at K270 million under the BSP First Home Ownership Scheme (FHOS).

BSP Home ownerships
The average purchase price in the market is under K500, 000, Chapiu tells Business Advantage PNG. The Hausples survey backs that up, revealing that 70 per cent of people intend to spend less than K500,000 on a property. Thirty per cent are intending to spend K1 million or more.
Care says just over half (56 per cent) of respondents are seeking to buy a property in the next 12 months, while over 26 per cent said they would consider buying property in the next 18 months.

 
Capital preferred

Port Moresby remains the preferred place to own a home, with more than 80 per cent of survey respondents indicating they would like to buy in the capital.
Chapiu says there are no restrictions to lending outside of Port Moresby. ‘In fact, BSP has seen an increase in home loan inquiries from other major centres in PNG such as Lae, Kokopo, Alotau and Madang’.

‘All intending home owners who apply for a home loan are subject to meeting credit risk requirements.’

The bank uses a mortgage over the house as its collateral. A mortgagee cannot spend more than 40 per cent of their income on the mortgage.
Chapiu says all intending home owners who apply for a home loan are subject to meeting credit risk requirements. ‘They must ensure that the property or land they plan to purchase must be on state lease land with the title issued.’

 

Planning needed
The Institute of National Affairs has written many research papers and run workshops on the issue of what its Director, Paul Barker, calls ‘the absence of formal management of the urbanisation process’.
This failure, he points out, has seen prospective settlers, customary landowners, businesses and opportunists ‘do their own thing, often outside the formal legal process, and following the principle that possession is nine-tenths of the law’.
Barker wants a major effort to upgrade and generate safe towns and cities, with affordable housing, amenities, utilities, public transport and recreational are

Housing boom?

Hausples CEO Mat Care estimates that 5000 to 6000 new affordable and middle-income houses will be built in Port Moresby over the next 18 months, with up to 50,000 additional homes slated to be built by 2020.

‘These comprise government initiatives such as the National Housing Commission’s mega-development at Duran Farm which will comprise 44,000 dwellings (standalone 2-3 bedroom houses),’ he says.
Other smaller private developments include:
– Mediterranean Apartments (48 units comprising bedsit and 2 and 3 bedroom homes);
– Community Housing Limited’s proposed development at 9 Mile (160 stand-alone 3 bedroom houses);
– Edai Town, 300 homes (2 and 3 bedroom homes).

The high-end domestic and expatriate housing market is predominantly apartment-focused in central Port Moresby.

This includes:
– Airway’s new 3-bedroom development specifically for the LNG Project;
– Credit Corporation’s Era Motana development (2 and 3 bedrooms)
– Ela Vista’s Gardenia Apartments (2 and 3 bedrooms);
– Nambawan Super’s Pinnacle Apartments (2 and 3 bedrooms).

Pangu to create Coffee Ministry 

BY FRANKIY KAPIN
The Pangu party will create a coffee ministry if it forms government after the 2017 national election.
Pangu party leader and Bulolo MP Sam Basil announced on this on Wednesday in the Kabwum district, Morobe province.

Pangu plans to create a coffee ministry when it forms Government

The deputy opposition leader was in the district to endorse the nomination of Haring Qoureka,the Pangu party candidate contesting the Kabwum seat left vacant by Bob Dadae who is now the tenth Governor General of Papua New Guinea.
Mr. Basil said apart from the existing agriculture ministry in the national government there will also be the creation of the coffee portfolio.
He said the current government has allocated K700 000 to agriculture but a Pangu-led government will see the creation of a coffee ministry allocated K1 billion.
He said from a total of K2 billion budgeted annually for agriculture, K1 billion will go to the coffee ministry.
Basil said for the past nine years serving in the government and opposition he has been able to deliver services as expected and now the manifestation of his leadership in the Bulolo district serves as the basis for endorsing ten candidates to contest the ten seats in the Morobe province.