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.
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.
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.
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.
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.
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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.
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.
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.
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.
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.
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.’
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.
‘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).
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.
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.’
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
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.
– 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).
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.
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.
By: Kevin McQuillan
High debt and deficit levels are the reasons why ratings agency Standard & Poor’s (S&P) has kept its Papua New Guinea country rating at B+/B, with a negative outlook. S&P Director, Craig Michaels, tells Business Advantage PNG that higher commodity prices are the key to lifting the rating.
Michaels, the Director of Sovereign and Public Finance Ratings, says the decision reflected the high levels of offshore debt and high government deficits.
‘These have been driven, directly or indirectly, by the large LNG project, and we thought those external and fiscal imbalances would unwind pretty quickly once the LNG project came on line,’ he told Business Advantage PNG.
‘But unfortunately, just as that happened, commodity prices globally fell very sharply.
‘So the revenues that were due to come on stream at that point have been coming in much more slowly and that’s why we have continued our negative outlook on PNG ratings.’
Sovereign ratings are used as an indicator for setting a country’s base interest rate. They also have an effect on its ability to raise offshore financing, which the PNG government has been attempting.
PNG’s rating has been comparatively stable. S&P has maintained its B+/B rating for over five years, although it converted its outlook to negative in October 2015, when commodity prices began to weaken.
Michaels says the government has responded ‘forcefully’ to the revenue declines through savings decisions, and by targeting declining fiscal deficits to keep debt within its targets.
Overall spending between 2014-2016 fell by about 13 per cent over this period, with the result that the fiscal deficit narrowed to 4.4 per cent of GDP in 2016, from 6.9 per cent in 2013.
‘We project PNG’s general government net debt to remain comfortably below 30 per cent of GDP.’
‘Despite an election in mid-2017, we expect the deficit to narrow further this year to less than 3 per cent of GDP,’ he says.
‘On this basis, we project PNG’s general government net debt to remain comfortably below 30 per cent of GDP.’
Michaels warns, however, that if the government fails to continue to restrain spending adequately, or if growth in the nominal economy comes under even further downward pressure, net general government debt could rise above 30 per cent.
Michaels believes domestic banks and pension funds have nearly reached their limits for lending to the government, and that the central bank is acting as lender-of-last-resort when government bond auctions are undersubscribed.
‘The limited demand for government debt has led to a sharp rise in yields on government paper in recent years, and the government’s interest burden has risen significantly as a result.’
‘Michael says one of the key challenges for PNG’s overall growth prospects is the high level of crime.’
Gross external financing needs are currently at 80-90 per cent of current account receipts, and likely to remain at that level as ‘it appears the government is very committed to keeping debt within its own debt limits’.
Michaels laments that, despite some recent improvements, there are gaps in economic and external data, as well as a lack of transparency in public-sector accounting.
Michael says one of the key challenges for PNG’s overall growth prospects is the high level of crime, ‘which we think is a major deterrent for investment outside the resources sector’.
‘S&P could return the rating outlook to ‘stable’ from ‘negative’ if we become convinced that the high level of external debt and the pretty sizeable fiscal deficits will continue to decline in a reasonably quick way.’
He expects growth to be 3 per cent in 2017, up slightly from 2.6 per cent in 2016.
‘The medium-term economic outlook hinges on whether further large foreign-financed projects—such as the Papua LNG project—go ahead.’
Michaels says S&P could return the rating outlook to ‘stable’ from ‘negative’ ‘if we become convinced that the high level of external debt and the pretty sizeable fiscal deficits will continue to decline in a reasonably quick way’.
‘And that will probably largely hinge on what happens with commodity prices.’
11 Apr 2017
by Kevin McQuillan
IT analysts and industry insiders tell Business Advantage PNG that the Papua New Guinea Government’s decision to merge bmobile and PNG DataCo under a Telikom PNG renamed Kumul Telikom is likely to increase competition and innovation. But the move will not be without challenges.
The merger of bmobile and DataCo with Telikom PNG, outlined in our interview with Kumul Telikom Chairman Mahesh Patel last week, will realise cost savings and harness the synergies among the three telcos, according to Public Enterprises and State Investments Minister Charles Abel.
Local industry insiders appear generally optimistic about the move, with some caveats.
Independent, Port Moresby-based IT specialist Russell Woruba, of Taragai Advisory, believes the restructure will reduce prices, and observes telcos now need to provide attractive bundled services in order to be competitive.
Carriers must offer enterprises and customers not only voice and data, but media content, ICT services, such as cloud options, as well as professional services, he tells Business Advantage PNG.
He notes, however, that to modernise Telikom to meet the current technological climate it may be necessary to involve outside partners who have the skill set and capital.
He also observes that Digicel PNG not only has market share but undisputed market power.
‘By consolidating its assets, Telikom, DataCo and bmobile can compete effectively and create synergies for operational efficiency.’
Masalai Communications’ IT specialist, Emmanuel Narokobi, sounds a note of caution about the restructure.
‘There is a huge cultural shift that needs to take place internally within all the organisations,’ he told Business Advantage PNG.
‘Personally, from our work with them we have tried to push shared services across the various companies but they still do not recognise the strategic benefits of such exercises.’
The merger is supported by a recent report issued by Singapore-based BMI Research, a subsidiary of the global ratings agency Fitch.
‘The transferring of the country’s main fixed-line and gateway assets into one entity, DataCo—which will provide backbone services and international connectivity to operators—will be positive for the market,’ says to the report’s author, Telecommunications Analyst Vanessa d’Alancon.
After DataCo’s plans to upgrade and run the National Transmission Network are completed, expected this year, she says internet service providers (ISPs) and businesses in Papua New Guinea will have access to wholesale capacity.
This will provide a boost to bandwidth and encourage market competition. That competition, she says, should reduce prices over the medium-term for consumers.
More competition for Digicel?
‘Telikom has already begun rolling out 4G at discounted rates in 2017 to encourage take-up and will be in a stronger position to compete with Digicel,’ says d’Alancon.
She warns, however, that it will be difficult for Telikom to take market share from Digicel given that operator’s strong presence in the mobile market. Digicel has been successful in the market since 2007 and has brought mobile penetration in PNG from 1.6 per cent in 2006 to around 45.5 per cent in 2016.
That said, there are still many areas where internet services are unavailable and most rural areas only have 2G services, providing significant growth opportunities.
Digicel’s CEO, Brett Goschen, told Business Advantage PNG that Digicel fully supports an environment where all operators have access to all forms of wholesale transmission capacity.
‘We believe it is fundamental to growing and improving a competitive, open market: prices decrease, service offerings increase and the consumer benefits tremendously.
‘It is clear that the Government’s original communication model involving the transfer of transmission assets to DataCo would go some way toward achieving that.’
That said, Goschen says, however, he is not convinced the new structure will achieve the original intentions of government, namely ‘to create a competitive, open communication industry that augurs growth and value, whilst encouraging innovation’. From the limited public information provided, he noted the new merger does not appear to promote competitive outcomes to the benefit of the consumer, such as reducing the cost of accessibility.
By: Douveri Henao
The past couple of days, we’ve seen politicians and commentators rushing to the public to remind us that they made these predictions years ago the economy was tanking. They read the signs, saw the writing on the wall and as prophets of old, we did not respond. All true. But the people of Papua New Guinea don’t want reminders, they want solutions and this is the disappointment for the past couple of days.
The only agreed consensus is kick out the current government and all will be well. Lets entertain the notion, but then what? How do you improve the economy? How do you turn the tide around?
I’m of the view that any new leadership will be constraint by 2 factors to make meaningful change in the state of the economy in which all governments of PNG suffered. These are the inability for political institutions to reform the age-old patrimonial system and the lack of diversity in political ideology.
PATRIMONIAL SYSTEM REFORM
Respected thought leader in political science, Francis Fukuyama, makes the observation that patrimonial systems or in our case, wantok system, continues to undermine the ability for political institutions to grow into efficient organizations. Whereby meritocracy permits the best and brightest to formulate and execute public policy to the best of their abilities.
The fiscal strategy of the current government has been underpin by the need to finance the patrimony. Over 12 billion kina has been given to sub national governments with limited capacity to absorb its use. While Waigani correctly claims its systems are able to deliver and execute projects of significance, no other government tier has the skills and resources. Therefore, this resource has largely fed the patrimony in an assortment of various schemes that have little impact to the constituency.
There is also the bulging public service that is unsustainable and at most times, unproductive. It has cost the country 10 billion kina in this session of parliament. Public institutions have become villagers where CEOs have become chiefs and officers from there liking have become nobles and enemies have become commoners. So the nobles and the chief thrive on this healthy state bill to build there kingdoms and along the way, execute meaningful public policy.
This Prime Minister and those before him have publically spoke of the rot that they have inherited in the public service. They have used various systems to mitigate patrimony and while some have been successful, many have not and its persistency undermines the fact that we need a different strategy.
The key position is for the new leadership to work towards transitioning the current patrimonial political system to a robust merit based system not in the public service, but in the political system. Its ok to use wantoks, but use wantoks that know their stuff. Instill benchmarks to push productivity and inculcate a climate of vigorous science in building policy. This in turn can assist the public institutions to deliver the desired vision.
THE NEED FOR DIVERSITY IN POLITICAL IDEOLOGY
Every Prime Minister and current MPs as well as most political parties have subscribed for a strong socialist left leaning political platform. Big governments to bring social programmes to the masses, big governments to drive commerce, big governments to protect the community and big governments to bring jobs.
While there is justification in this messianic approach due to market failures that undermine investment beyond Waigani and provincial capitals, it undermines other important players to participate in development. The efficiencies of the private sector and the enthusiasm of the civil society need to coexist and where possible, thrive.
The new leadership needs to facilitate rather then participate and monopolize development. There are something’s that the public service and political systems isn’t built for and that limitation needs to be recognized.
We need political systems to be less emotional and more juiced up on the smarts. We need political systems to be more facilitative and less monopolistic.