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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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
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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.

Higher commodity prices the key to improving Papua New Guinea credit ratings, says Standard & Poor’s Global Ratings

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.’

 
Forceful

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.

Fiscal-operations-of-government
PNG Government revenues, expenses and deficits/surplus – Source: Bank of PNG. 2017 Budget Papers

 
Debt financing

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.

 

Growth

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.’

 
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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.’

Ela Beach gets timely Facelift

By: Jonny Andrews

I have been watching with interest the developments happening at Ela Beach.

It saddens me that most of the trees will be cut for this development but I am reminded that in order for something/someone to be remold they had to be broken into many many pieces.

Papua New Guinea is growing and with growth comes development. Development of infrastructure,  development of its tourism industry and development of its landscapes.

We continually compare ourselves to the Arab Nations but we must understand that, they reached that stage by starting off where we are right now. It was not an overnight miracle, it was a progressive development that changed their nation.

The Ela Beach Redevelopment it seems has 3 Contractors working on it.
1. Apec Haus and the Marina by OSL
2. Ela Beach Waterfront by CHEC
3. ?????  – this would be another company which will develop the area towards Koki

It is not only the Beachfront that is getting developed, the properties opposite the road would also see development. Currently, there is a plan to redevelop the IEA School, Ela beach hotel and properties inline with the whole development of Ela Beach.

This development of Ela Beach will join the Paga Hill Development and make it one of the biggest Development in the Pacific Region compared to other Pacific Island Nations.

Papua New Guinea is moving forward, it is time we also move our mindset and look forward to greater participation in our own land.

 


Port Moresby’s iconic beach to be modernized at a cost of K55 million. New developments to include APEC and a 4-lane highway
THE Hiri Moale Festival will be allocated space in the current redevelopment of the iconic Ela Beach in Port Moresby.

ela-main
Redevelopment of IEA in Ela Beach

This was made known by Member for Moresby South Justin Tkatchenko when he responded to questions on the redevelopment of the beach.

He added that the Motu-Koita Assembly, the voice piece of the Motu-Koitabu landowners of traditional Port Moresby, was in agreement of the redevelopment of the beach front which would bring in new jobs.

The annual three-day event, which culminates in the crowning of Miss Hiri Hanenamo, promotes the culture of the Motu coastal villagers

Mr Tkatchenko was also asked on the controversial issue of the land title which he fought to have extinguished after it was awarded to Awak Holdings Limited two years ago.

“I did not agree with the way the title was handed to Awak Holdings via the Lands Department.” Awaks development plan had also entailed reclamation of the shorefront about 50 metres but it met with opposition from Mr Tkatchenko and traditional landowners.

09ak_trees_0
Ela Beach Redevelopment by China Harbour Construction

“The beach front comes under National Capital District Commission and it is State land, open space and recreational.”

He added that after the extinguishing of the land title, the title was publicly tendered by NCDC and awarded to Cardno and China Harbour Engineering Company for the roadworks.

The Ela Beach Foreshore Development Plan was unveiled in September last year.

In that plan the beach front will undergo two stages of development with stage one will see completion of APEC Haus to be constructed on NCDC’s sea park land. APEC Haus will be the venue for the Asia-Pacific Economic Co-operation Leaders’ Summit next year.

The second major development would be the construction of Ela Beach Road as a four-lane road to align with Healy Parade and Paga Point Ring Road; construction of about 300 car parks; and redevelopment of Ela Beach as per the unveiled master plan.

NCDC had dedicated its land being the former sea park jetty for the construction of APEC Haus. Post Courier /ONE P

 

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$17 million road improvement, beach extension project in Port Moresby

By Benorah Hesehing

PORT MORESBY, Papua New Guinea (The National, Feb. 10, 2017)

Work will begin today to give Port Moresby’s iconic Ela Beach a K55 million [US$17 million] facelift.

 

NCD Governor Powes Parkop said the redevelopment project involved the construction of a two-lane road and an extension of the beach by another 100 metres.

“The work will begin tomorrow (today) and I am calling on the public for their understanding and cooperation,” Parkop told a media conference yesterday.

“There will be some disruptions for the earth work but we intend to keep the existing roads operational while the new lanes are being constructed.

Ela beach Road Map
Road Map for Ela Beach Redevelopment

“Some of the trees, shrubs and palms which provide shade would be removed to create way for construction.”

He added that the National Capital District Commission was doing all it could to retain the old trees. “We understood that the older trees were part of the Ela beach heritage and are working hard to save those, which can be saved,” Parkop said.

He said the people should not think about what they would lose, but what they would gain from the redevelopment project.

Ela-Beach-Marina-Development
Ela Beach Marina Hotel

Moresby South MP and Minister for Sports and National Events Justin Tkatchenko said the project was a “fantastic achievement for NCDC”.

“We can plant advanced trees within the landscaping for Ela Beach to ensure what is replaced is suitable or even better,” he said

Ela-Beach-Marina-Development-1
Ela Beach Marina with APEC Haus in the Middle

 

The complex business of PNG LNG market

By: Andrew A Arthur

After 200 shipments of LNG from Papua New Guinea and still we have not seen an profit nor have we seen any developments in Papua New Guinea!

This just one of the many comments by frustrated landowners and citizens in Papua New Guinea about the commercial viability of the PNG LNG.

Recent protests by landowners of Portion 152 for unpaid royalties also aired the same sentiments.

But why is there a delay on any inflows into the Government coffers and into the Government operating accounts to fund the national budget??

There are many answers to that but the root cause is how the agreement was structured and who gets what percentage and how did they fund their share percentages.

See below the share structure of the PNG LNG agreement;

  • Exxon Mobil (US) 33.201%
  • Oil Search (Aus) 29.003%
  • Santos (Aus) 13.532%
  • Nippon Oil Exploration (Japan) 4.680%
  • PNG Govt (NPC + Petromin) 16.779%
  • Landowner 2.805% 

Inorder to take up shares in the PNG LNG, you need to fund your percentage in those shares. PNG Government had to take an IPIC loan of over $1billion to fund its shares. All other parties would have done the same and taken out loans.

When the gas are sold, the parties start repaying their debt, these would equate to at least 3-7 years of loan repayments until they start to earn a profit from the sale of the gas.

It is estimated that by 2017, Papua New Guinea Government would be turning some profit in the 2nd quarter of the year when major loan repayments are done.

Papua New Guinea is on track to seeing huge profits from the sale of its LNG….

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Japan is major LNG buyer
By: Post Courier -1st March 2017
JAPAN is the largest buyer of liquefied natural gas in the region and is ready to share its experience of LNG and expand into the Asia-Pacific LNG market.
Yuki Sadamitsu from the Japanese Ministry of Economy, Trade and Industry, said Japan remains the largest buyer of LNG in the rapidly growing LNG market in Asia.
Mr Sadamitsu made these remarks in his keynote address yesterday at the Petroleum and Energy Summit at the Stanley Hotel in Port Moresby.


“Japan remains to be a large buyer of LNG for the foreseeable future.
“LNG demands will be larger than the government estimate.
“Japan is ready to collaborate with global, especially Asia-Pacific partners to develop and expand the LNG market.
“This of course, includes cooperation between the energy producing and the consuming countries,” he said.
Japan is a consumer of mixed energy sources such as fossil fuel, oil, coal, LNG and others and is looking at reforming its energy market.
“Japanese LNG market is under drastic reform of liberalisation,” Mr Sadamitsu added.

As part of Japan’s strategy for LNG market development, they are looking at three pillars which are tradability, infrastructure, and price discovery including market expansion to move forward.
“If you look globally, Asia is the most rapidly growing LNG market.
“Asia LNG import will almost double by 2030.
“We, the Japanese government and companies are ready to cooperate with Asian countries to share know-how of LNG and expand the Asia-Pacific LNG market.
“We will work on the LNG strategy for Asian countries this year,” Mr Sadamitsu said.