Abel’s 100 DAY PLAN explained

100 DAY PLAN EXPLAINED IN PARLIAMENT

1st December 2017

The 100 Day, 25 Point Plan expires on the 2nd of December, and in the light of prevailing circumstances was and is intended to demonstrate proactive and inspire confidence and kick start the Alotau Accord II by understanding specific activities around.

  • MAINTAINING FISCAL DISAPLINE AND BOOSTING FOREIGN EXCHANGE
  • GROWING OUR REVENUES
  • STRENGHTENING OUR ECONOMIC BASE AND IMPROVING OUR GOVERNANCE and
  • ACTING STRATEGICALLY

 

These activities obviously roll into point 1 and 2of the 25 Point Plan which are the 2017 Supplementary and 2018 Budgets.

The intention of points 1 and 2 was to maintain fiscal discipline in the light of the prevailing difficult circumstances in terms of our budget parameters of 2.5 % fiscal deficit and debt to GDP of 30% so as not to put more stress on government financing and the economy.

A number of measures were undertaken to maintain the discipline but primarily as per Point 4, and thanks to the understanding of Honourable Members of this Parliament, the Service Improvement Program was reduced in 2017.

Pont 3 was related to payroll strengthening and the Ospeac (Organisation, Staffing and Personal Emoluments Committee) has been reactivates and is progressing a payroll audit and cleansing exercise and the NID registration requirements as explained by the Minister for Public service in Parliament. This is response to the primary cost escalation factor of Government which is the unsustainable growth in personal emoluments.

Point 5 was for;

  1. The drawdown of the balance of the Credit Suisse loan of which two technical requirements will have been met following the budget session enabling the final balance to be drawn.
  2. To access World Bank and ADB Budget support funding for the 2018 budget. This has been achieved following my trip to Washington where the world Bank will provide US$100m for debt restructuring in 2018 and another $100m in both 2019 and 2020. The ADB is also providing budget support commencing in 2018 for the health sector for up to US$300m commencing in 2018.

These measures provide financial resources at good terms and bring in foreign exchange.

 

Point 6 was for ;

  1. Oil search to provide a minimum of 50% of the crude oil needs to the Napanapa Refinery and in Kina terms. This has been achieved through an agreement and is happening.
  2. Transition to gas powered electricity – The Pom Gas 58MW electricity project has been approved by Cabinet and has commenced construction to provide the cheapest in the country power source using our own gas and all sales dominated in Kina. The power plant will be owned d by oil search and Kumul Petroleum with shares to be taken up by MRDC. The availability of domestic gas can catalyse other gas powered initiatives.
  • Rice production – the lrice quota scheme has been delayed and 3 large scale rice projects are being developed with 3 separate private sector partners and potential support in the 20187 budget through the Agriculture Commercialisation Fund.
  1. The Bank of Papua New Guinea intervention into the forex market was US$100m is done. The BPNG is now conducting a review on all foreign currency accounts and the oligations od those account holders, particularly resource companies to remit excess funds back to PNG.

 

Pont 7-  For non-tax revenue collecting agencies to remit 90%  of their revenues to CRF has commenced and with some immediate action with specific agencies and will be reinforced by the Public Money Management Regularisation Bill 2017approved by Cabinet and to be tables in conjunction with this budget.

 

Pont 8 and 10 – Relate to tax regime reform and this is being managed through the new Medium Term Revenue Strategy, developed in conjunction with the IMF and a new tax Administration Bill which I will bring shortly. Measures will commence in the Budget to tidy up the tax code and the BPNG, IRC, IPA and commercial banks and cooperating to enforce compulsory Tax Identification Number requirement for opening bank accounts. The commercial banks have agreed to provide information to the IRC regarding bank accounts. The commercial banks have agreed to provide information to IRC regarding bank account being operated in a business manner for further scrutiny. Significant funding support is provided in the 2018 budget for both the IRC and the Customs to boost capacity against quantified additional revenue collection

 

 

Point 9 – The establishment of the task force for IRC, Lands, Customs and Illicit Trade. Funding has been provided in the Supplementary Budget and the Attorney General, Labour and Immigration Ministers are leading the Customs and Illicit Trade, Lands Minister- the Lands task force and Treasurer – the IRC task force.

 

Point 11 – Progress of some significant resource development projects and Wafi Golpu, PNG LNG expansions, Papua LNG are all on track for early works, pre FEED or FEED in 2018. Western LNG has announced pre FEED works last month.

 

Point 12 – The launch of the new Australian DEFAT grant funded project, the PNG- Australia Economic and Social Infrastructure Program and ANGAU Hospital re-development design and still pending, and the TB project co-funded with the World Bank has had the financing documents executed already.

 

Point 13 – The power projects;

  1. The 58MW Pom Gas project construction has began
  2. The 30MW PNG Bio Mass project with Oil Search is in progress
  • The Ramu 2 180MW Project has had commercial close via a Cabinet decision but is pending financial close due to certain conditions precedent.
  1. Naoro Brown River Hydro Project is progressing with funding from the World Bank
  2. Hela Gas power solution is being negotiated with Exxon Mobil and Oil Search. In the meantime funding is provided in this budget to pull the powerlines from Mendi to Hides to provide the missing power and NBN telecommunications link to access power to communities from the Ramu Grid and surplus from the Tari existing generator.

 

Point 14 – Certain High Impact Projects

  1. The international submarine cable from the Australian Government has now offered to fund from Sydney to Port Moresby and Port Moresby to Honiara, PNG will own these 100% and 50% respectively and will substantially increase reliability and lower cost of data in PNG some 25 times.
  2. The Pacific Maritime Industrial Project has had a few financing agreements signed with the China EXIM Bank.
  • The Sepik Plains agriculture Project together with Baya Valley and the Central Plains are identified for large scale rice production as described earlier.

Point 15 – The commercial of the US$1 billion upgrade of the Highlands Highway of which the Project Management Unit has been established at Works and contracts have been advertised for supervisory contractors. Work will commence in 2018.

 

Point 16 – The Gerehu 3B Affordable Housing Pilot Project where 1762 allotments have been made available free to qualifying citizens. The earthwork has been completed and power and water services are being constructed. Together with the concessional funding at BSP, this will make housing accessible to ordinary Papua New Guineans and drive construction and employment. It can provide an example to duplicate in other centres.

 

Pont 17 – Commencement of the New Enga Provincial Hospital construction and Mount Hagen Hospital PPP redevelopment plan in 2018.

 

Point 18 – The ceasing of closed tender financing which Cabinet has approved and the bringing forward of the National Procurement Authority Bill which is ready to come back to Cabinet after changes were requested by Cabinet.

 

Point 19 – Requires audited accounts for SOEs and Statutory Authorities by Mid-2018.As treasurer it will be tabling all the reports for the Agencies under my responsibility as soon as they are cleared by Cabinet.

 

Point 20 – Have all prescribed Boards appointed. This is underway, particularly under the State Enterprise Minister and Agriculture Minister.

 

Point 21 refers to thr freeing up resource land owner benefits;

  1. The PNG LNG Land owners vetting issues are ongoing but royalty payments to the plant site land owners have commenced and it is anticipated to shortly resolve the pipeline first payments and the progress to conclusion the clan vetting at the gas fields.
  2. The Ok Tedi land owners CMCA and non-CMCA have funds held in trust that have been cleared by the courts and I am waiting on advice from the Justice Department to authorise some of the pending contracted works against those funds.

Point 22 – Proposed to suspend proposed amendments to the Lands Act, In the IPA Act, the Agriculture Investment Act, the Agriculture Administration Adjustment Act and the Mineral resource Authority and the Mining Act to allow further consultation. This has been done.

 

Point 23 – Refers to the National Energy Authority Bill. This should refer to the Petroleum Authority Bill which is being finalised in Parliament.

 

Point 24 – Refers to progressing the Population Policy and finding has been provided in the 2018 Budget under the Sustainable Development Program at Planning for this.

Point 25 – Refers to Medium Term Development Plan 3 to be published in 2018. This is a 5 year development plan and indicator targets for the government of the day which will incorporate the United Nations sustainable Development Goals.

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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 

Kroton Option Exercise by Interested Beneficiary Groups

January 06,2017, 06:46 pm

The Managing Director of Kumul Petroleum Holdings Limited (KPHL), Mr Wapu Sonk today announced that the Company has been working with beneficiary groups that have expressed their interest to exercise the Kroton Option Equity.

These groups will be called in over the coming weeks to sign up on the share transfer documents as well as the vendor note being offered by KPHL.

18_kumul_petroleum

The following beneficiary groups have come forward;

(1) PNG LNG Plantsite

(2) PNG LNG Pipeline

(3) PDL 9 – Juha

(4) PDL 4 – Gobe and,

(5) Fly River Provincial Government.

The option to acquire shares in Kumul Petroleum (Kroton No 2) Holdings Limited is one of the benefits agreed to by the PNG Government and set out in the Umbrella Benefits Sharing Agreement (UBSA) in 2009 for landowners and Provincial Governments along the footprint of the PNGLNG Project.

Under the UBSA the PNG Government granted the landowners and Provincial Governments a commercial option to buy 25.75% of the shares in Kroton No 2 Limited, the special purpose company that holds the State’s 16.57% interest in the PNG LNG Project.

In addition to the beneficiary groups who have registered interest to sign up in the coming weeks, one landowner beneficiary group and four provincial governments have already taken up their Options. They are PDL 5 (Moran); and Southern Highlands, Hela, Gulf and Central provincial governments.

Mr Sonk said; “The Beneficiary Groups who have expressed their intention before the 31st of December 2016 to exercise the Kroton Option using KPHL’s Vendor Finance Facility are hereby advised that signing of the share transfer documents and the Vendor Finance Facility is scheduled in the coming weeks until the 31st of January 2017.”

He pointed out that KPHL’s role was to implement the agreement that was reached in the UBSA and, provide additional benefits for the Landowners and relevant Provincial Governments if they elect to invest in Kroton.

KPHL will work with those beneficiary groups that have signed up to complete the transaction and arrange necessary governance aspects of the interest holdings in Kumul Petroleum (Kroton No 2) Holdings Limited.

http://www.postcourier.com.pg/News/kroton-option-exercise-by-interested-beneficiary-groups/#.WHMwrVN96Ul