Getting the Basics Right – Invest in Agriculture

By Jonny Andrew

Since 1960, the world population has more than doubled, from approximately 2.9 billion in 1960 to more than 6.7 billion today. The demands placed on global agricultural production arising out of population and income growth almost tripled. Global agriculture has been successful in meeting this increase in demand. Steady growth in agricultural output and a long-term decline in real commodity prices attest to this success. While the 820 million undernourished people in developing countries must not be forgotten, it should also be recognized that the proportion of people suffering from hunger has fallen by half since the 1960s, from more than on-in-three to one-in-six, even as world’s population has doubled. Progress is possible

Agricultural growth contributes directly to food security. It also supports poverty reduction. And it acts as an engine of overall economic growth in much of the developing world. The success of the agricultural sector has not been shared uniformly across regions and countries, however, and it is unclear whether this success can be sustained much less extended to those left behind. Many of the least developed countries, particularly in sub-Sahara Africa and in marginal production environments across the developing world, continue to experience low or stagnant agricultural productivity, rising food deficits, and high levels of hunger and poverty.

Papua New Guinea is not an exception to this and according the National Agricultural Research Institute Corporate Plan 2002-2004, “PNG has been identified by FAO as a country with poor food security. This is evident with increasing volumes of food imports, declining purchasing power and indicators of malnutrition.”

Rice is a staple for nearly half of the world’s seven billion people. However, more than 90% of this rice is consumed in Asia, where it is a staple for a majority of the population, including the region’s 560 million hungry people.

The success of the Green Revolution in the early 1960s witnessed a steady rise in Asia’s rice consumption. Outside Asia, rice consumption continues to rise steadily, with the fastest growth in sub-Saharan Africa. In the past two decades, per capita rice consumption in sub- Saharan Africa (SSA) has increased by more than 50%. Similarly, rice consumption continues to grow steadily in both the United States and the European Union as consumers diversify from protein to more fiber-based diets and also because of rising Asian immigrants. In Papua New Guinea, rice continues to be the main food for many consumers.

According to ADB Working Paper on ASEAN and Global Rice Situation and Outlook 2012, Rice output is expected to grow more with the ever increasing population growth.

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Source: ADB Sustainable Development Series Working Paper Series – August 2012
The World Bank has already supported Rice Sector Development as a poverty Reduction tool in Greater Mekong Sub-region and even in the African countries. Yet it has turned a blind eye on Papua New Guinea and its fight for food security.

The question we should all be asking now is……..why hasn’t Papua New Guinea investing more into Agriculture and in particularly Rice?

 

 

 

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Foreign Exchange Reserves Demystified

What is Foreign Exchange Reserves?

By Jonny Andrew

Foreign Exchange Reserves are reserve assets held by the Central Bank (BPNG for PNGs case) in various currencies and sometimes in various countries around the world to back liabilities on their own currency.
Foreign exchange reserves come in several forms, which include foreign banknotes, bank deposits, bond, treasury bills, gold bullion, and other government securities and IMF funds.

For many years, gold served as the primary currency reserve for most countries. Gold was long considered the ideal reserve asset, often appreciating in value even during times of financial crisis, and believed to retain an almost-permanent value. However, all assets are only worth as much as buyers are willing to pay for them, and since the breakdown of the Bretton Woods system in 1971, gold has steadily declined in value.

 

Why do we hold Foreign Exchange Reserves?

There are 2 main reasons for holding a foreign exchange reserves while others some likely reasons;

  1. Tool for exchange rate or monetary policy
  2. Held to back the local currency
  3. Service foreign currency liabilities and debt obligations
  4. Source of funds to pay for government expenditure overseas
  5. Defense against emergencies or disaster
  6. Investment fund

Reserves are considered assets in a capital accounts but it is important to remember the liabilities associated with foreign reserves. They are borrowed, swapped with domestic currency on the international exchange market, or purchased outright with domestic currency – all of which incurs a debt. Exchange reserves are also as risky as any other investment; should a currency collapse, all foreign exchange reserves held in that currency around the world will become worthless.

 

How do we acquire Foreign Exchange Reserves?

Broadly speaking, authorities do not hold currencies other than their own, thus to fund the foreign reserve, there are 3 main reasons on how central bank achieves that;

  1. Borrow foreign currency formally
  2. Borrow foreign currency against local currency in a forex swap
  3. Buy foreign currencies outright with domestic currency

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Why do we need to manage our Foreign Exchange Reserves?

In most countries, the reserves are owned by the central bank; that is, they are on the central bank’s balance sheet and the ultimate decisions on reserves management are taken within the central bank’s management structure and its monetary policy.

Sound reserve management practices are important because they can increase a country’s or regions overall resilience to shocks. Through their interaction with financial markets, reserve managers gain access to valuable information that keeps policy makers informed of market developments and views on potential threats. The importance of sound practices has also been highlighted by experiences where weak or risky reserve management practices have restricted the ability of the authorities to respond effectively to financial crises, which may have accentuated the severity of these crises

According to the Bank of Papua New Guinea 2016 march quarterly report, the objective of the Monetary policy “is to achieve and maintain price stability. This entails low inflation supported by stable interest and exchange rates.”

Maintaining price stability leads to;

  • Confidence in the kina exchange rate and management of the economy;
  • A foundation for stable fiscal operations of the Government;
  • Certainty for businesses to plan for long-term investment; and
  • A stable macroeconomic environment conducive to economic growth.

 

Optimal Size of Foreign Exchange Reserves

In developing countries and small economies like Papua New Guinea, there are often debates on the foreign exchange reserves and the size. It is often pointed out that there are not enough foreign reserves, or claims that the sum of foreign exchange reserves should be higher. The public is lead to believe that “good foreign exchange reserves are good and the more foreign currency reserve is better”. There is however very complicated mathematical formulae suggested by the IMF to calculate a countries optimal foreign exchange reserves. But in a nutshell, Central Banks always strive to achieve very MINIMAL foreign reserves with no upper limits.

Finally, the question we should all be asking isn’t about having a high level of foreign exchange reserves rather should we develop as a country or not? Maintaining high foreign reserves are good, but should we sacrifice a countries social and economic development to just shore up reserves?

The way forward is highlighted in a research done by African Development Bank Group on ‘Holding Foreign Reserves versus Infrastructure Investment”

Investment Vehicle be created to complement the private, public and development partners objectives. It should focus on;

  1. Economic infrastructure projects that has regional impacts
  2. Innovative mechanism for cross-border infrastructure investments
  3. Deal with Political risk, credit risk and refinancing risk

Credit must be given to the Bank of Papua New Guinea for their prudent management of the Economy. Whilst the global commodity prices slumps, their management had shielded us from external shocks and imitate the associated risks.

BHP Billiton behind Protests 

By Noah Ariku
WAKE UP EVERYONE: BHP IS THE PUPPET MASTER TODAY!!

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I do not Condone anything against the rule of law. 

PNG is bigger than any one single person including Peter O’Neill who he is capable of defending himself so I am not speaking for him.

Same time I do not support Mining Giants like BHP manipulating everyone in this nation today like they did to defeat us NGOs and pass the 8 Ok Tedi Supplemental Act over 20 years ago making it illegal for Ok Tedi and Fly River Landowners to sue them for environmental damages.

They did the same to Panguna Mine landowners forcing them to take up their case overseas.

All our mines and petroleum resource extraction projects cannot sue for damages too.

University students. Wake up, you are not fools. What happened to the 122.2 million OTML shares on the day the 10th OK Teki Supplemental Act was gazzatted?

This is a hell of alot of money embezzled through capital flight!!

The Puppet Master has been doing it and wants to continue doing it.

Therefore he must divide and rule PNG.

Wake up! BHP and Rio Tinto are using naive and gullible university students to protect their selfish interest. 
Stupid pea brain politicians are making it all the more worse driven by their self interests.

All this protest and change of government hogwash is not in the interest of PNG but for the capitalist interest of BHP!! 

Wake Up. There is more to it than what you hear or see!!

BRING BACK LEADERSHIP CODE

By John Peleu

I wish to remind everyone first and foremost that no one is above the law, even the Prime Minister.

However, having said that, we must take into consideration that our current PM, Hon. Peter O’Neill swore an oath to protect the Office of the Prime Minister and its function when elected in 2011, and again after the elections in August of 2012.

At current we face division amongst our own people, including our law enforcement officers. Many support a warrant of arrest that was signed by the Chief Magistrate Ms. Nerrie Eliakim in 2014 to have our PM arrested over allegations of his involvement with the Paraka scandal.

I agree that our peoples’ voice must be heard, however since independence, no Prime Minister has handed himself into Police for questioning over allegations on corruption, until tried by the Leadership Tribunal.

Why because there is a process in this country we have always followed when leaders were suspected of, or found to have breached the leadership code.

According to the Constitutional Planning Committee Report 1974, Chapter Three (3) under the Leadership Code gives definition and also examples of the LC.

2. Our notion of a “leader” is not confined to the Ministers, the Speaker, the Leader of the Opposition and other members of the National Parliament, since they are not the only people who hold official positions of significant power, authority or influence in our
country. Senior public servants, senior Police and Defence officers, constitutional office- holders (including judges and magistrates), senior officers of statutory bodies and boards, government nominated directors and general managers of corporations, members of provincial assemblies and senior officers employed by provincial governments, senior staff of Ministers and Opposition leaders, members of the Advisory Committee on Citizenship Matters, and presidents, chairmen and mayors of local bodies exercising governmental functions (e.g. local government councils and associations such as Warakarai na Gunan and Greater Toma “Council”), senior administrative officers of these bodies, academic and senior administrative staff of tertiary institutions, office-holders of registered industrial organizations, ambassadors, high commissioners and senior diplomatic officers, and office-holders at the national level of registered political parties –
all of these people, we believe, should be regarded as leaders for the purposes of this Chapter.

When a complaint is made through the Office of the Ombudsman Commission, a case is presented to the Public Prosecutor who then recommends for hearing by a special court, known as the Leadership Tribunal.

And for every leader investigated, a Leadership Tribunal carries out an important function to pursue its investigations and findings before instituting court proceedings before passing judgement over a leader’s conduct in office.

That is the process we practice in our democratic country, and not subject to normal investigations by officers within the police force who operate on their own accord.

The Leadership Tribunal are assisted by the findings from our police.

Whilst there is growing support for investigations carried out by our National Fraud & Anti-Corruption Directorate, we must also let the investigations follow a proper process that adheres to the Leadership Code.

And of all people, it is fair that the Police Commissioner understand the repercussion by setting a very dangerous precedent if he does not control his officers at this juncture.

We must also take into consideration how the entire investigations was influenced by a group of politicians in 2013, who visited the Office of the Police Commissioner who at the time was Mr Thomas Kulunga, and made an official complaint. They also visited the Office of the Ombudsman Commission and the National Fraud & Anti-Corruption Directorate.

Take note that a formal complaint to investigate the current PM was done by politicians. Therefore the investigations is politically tied and can be seen as a means in overthrowing the current government.

If so, then the victors will be politicians and not our people.

This trend is a very dangerous trend and sets a dangerous precedence where future Prime Ministers can be overthrown through the same notion.

We must always remember that leaders, even though are subject to law, must be tried by a Leadership Tribunal.

Every citizen is subjected to the rule of law, however the rule of law currently practiced, promotes a vigilante style noted as unprecedented and canny.

We cannot allow a precedence to be set whereby a Prime Minister is subjected to a vigilante police investigation without observing proper processes in place.

Therefore, we have an obligation to support our current Prime Minister in making sure, a similar incident never occurs in the future.