COMMENTARY

REGIONAL CONSULTATION FOR THE PROPOSED EXTRACTIVE INDUSTRIES TRANSPARENCY COMMISSION BILL IS UNDERWAY

A Commentary By Gedion Timothy 

The extraction of minerals such as gold, copper, zinc and petroleum resources such as liquefied natural gas is complex and challenging. The complex and challenging environment presents both opportunities and challenges for economic advancement for any nation. Governments must be applying the right fiscal tools to derive best value from the extractive value chain particularly for countries like Papa New Guinea which is known to be richly endowed with natural resources and its difficult geography. Strong political leadership backed by a robust service delivery model is key to unlocking value for the extractive industry activities.

It is good to note that the Papua New Guinea state wheels are in motion to implement ambitious state initiatives ranging from policy reforms to legislative changes to resources laws to unpack the economic value the resource sector has for Papua New Guinea’s future.  For example, a proposal to establish a Sovereign Wealth Fund (SFW) was a brilliant move in itself with key officials from the department of Treasury and Bank of Papua New Guinea (BPNG) providing technical oversight- to initially park Government windfalls from the PNGLNG Project for budget support and future use. Drop in oil prices commencing 2014 appears to have temporarily watered-down efforts to get this wealth fund operational but Papua New Guineans still have the faith that the wealth fund will come to fruition at some point in time for the benefit of future generations.

This is a clear testament of the fact that the PNG Government does not fold arms and watch as a by-stander only to collect its dues from the extractive industries for budgeting purposes but also an active participant in the economic value chain of resource projects. The PNG Mining Act provides for the State to acquire up to 30 percent share in any mining project and similarly the Oil and Gas Act provides for the state to acquire up to 22.5 percent shares in petroleum projects.

The streamlining of Government business through the Kumul arrangements strongly demonstrate how smart those in leadership think and plan for the future of Papua New Guinea. The Kumul arrangement places the Sate in a better position than before to actively participate in PNG resources sector.

Alongside these activities, the PNG Government is also serious about promoting transparency and accountability in the mining and petroleum sector which is the present powerhouse of the PNG economy.

Since 2014, the PNG Government commitment is demonstrated through the publication of six reports in strict compliance with international reporting best practice known as the Extractive Industries Transparency Initiative Global Standard.  The seventh PNGEITI Report will be published in the coming days.

A small secretariat situated at the Department of Treasury coordinates a tripartite constituent of key Government agencies, mining & petroleum companies and civil society organisations for oversight and guidance in the publication process of the EITI Reports.

Papua New Guinea is among a band of 53 countries promoting transparency and accountability in the mining and petroleum space through the EITI Reporting process.

Close to seven years into implementing the EITI, a proposed legislation to transition the Papua New Guinea Extractive Industries Transparency Initiative National Secretariat into a statutory body is undergoing public consultation beginning this month.

This follows the successful conclusion of a series of consultations among legal and technical officials of key government institutions, mining & petroleum companies and civil society organizations on the elements of what is proposed to be the Papua New Guinea Extractive Industries Transparency Commission in Port Moresby towards the end of last month.

Head of PNGEITI National Secretariat Mr. Lucas Alkan thanked instrumentalities involved for progress made so far in shaping an appropriate legislation that will be a best fit for the replacement of the PNGEITI National Secretariat which is now situated at the Department of Treasury.

“When enacted into law, the PNGEIT Commission will function as a statutory body for the implementation of the global Extractive Industries Transparency Initiative Standard and principles through the publication of EITI Reports,” Mr. Alkan says

“The push for the establishment of the PNG EIT Commission is part of a bigger policy drive to institutionalize and systemize EITI reporting anchored into the PNG legal and policy framework.

“PNG has made considerable progress with the publication of seven flagship PNGEITI Reports since PNG subscribed to the EITI Global Standard in 2014 to promote transparency and accountability in mining and petroleum sectors to enhance good governance and better management of proceeds from these important sectors of the economy.

“Seven years into implementing the EITI Standards through the publication of EITI Country reports and considering the fact that PNG is endowed richly with mineral and petroleum resources, PNGEITI is maturing into its next stage to meet the evolving challenges of the industry.

“What the PNGEITI Multi Stakeholder Group is doing now is to legally establish an entity to render administrative services for effective EITI implementation in Papua New Guinea.

“I am pleased to note that considerable progress has been made so far with a draft bill already in our hands and also pleased to note that the PNGEITI is comfortable with this piece of legislation which will undergo further public consultation in the coming months.

“A technical team conducting consultation on the draft bill commenced this week in Kokopo, East New Britain with a weeklong consultation scheduled to take place in Kavieng, New Ireland Province starting next week Monday, 12^th July, 2021,” says Mr. Alkan.

Papua New Guinea is richly endowed with natural resources for economic development and progress when the resource are put to prudent use as opposed to squandering them or improperly exploiting to the indulgence of a tiny minority. At the watchful eyes of the Papua New Guinea population, it is the function of the State to ensure that proceeds of economic activities associated with the resource sector is trickled down for the benefit of all citizens. The technical nature of the extraction of natural resources presents opportunities and the leeway for corrupt practices to persist.

Photo Caption: (Left) Head of the PNGEITI National Secretariat Mr Lucas Alkan with Channan Kumalau of the Department of Petroleum after a state Technical Working Group Meeting on the Extractive Industries Commission Bill last month in Port Moresby.

Note: The author is short-term journalist with the PNGEITI National Secretariat. The views expressed are his own and does not reflect those of the PNGEITI NS or the PNGEITI Multi Stakeholder Group (MSG). 

The elements of the proposed EIT Commission bill will be discussed next week in a similar article. 

Before Papua New Guinea signed up to implement the Extractive Industries Transparency Initiative EITI Standard in 2013, there was no framework in place for disclosure of revenue streams from the country’s mining and petroleum sectors. Nor was information on how much proceeds end up in the government budget or spending for socio-economic development readily available.

EITI is a global organisation established in 2002 with a goal of increasing industry transparency and accountability in the mining and petroleum value chain. Countries participate by issuing annual reports reconciling payments from the extractive industries to receipts by governments, in accordance with the EITI Standard.

Through participation in EITI, Papua New Guinea (PNG) is seeking to improve public understanding of the management of the extractive industries, increase the accountability of both government and industry, and improve the attractiveness of PNG as a destination for foreign investment.

Since 2013, government support for extractive sector transparency, both in terms of policy decisions and resource allocation, has been relentless culminating in the publication of four EITI reports covering fiscal years 2013-2016. These reports contain recommendations for improving extractive sector governance in Papua New Guinea, formulated by the multi-stakeholder group (MSG). To ensure that the recommendations would be implemented, PNGEITI brought the recommendations to the attention of the National Executive Council (NEC), Papua New Guinea’s highest inter-ministerial policymaking body. In 2017, the NEC issued a decision directing relevant government entities to implement the recommendations.

Eight recommendations out of a total of eleven recommendations have been fully implemented.

The first recommendation was that the State-Owned Enterprises (SOEs) should participate in the work of the MSG. The Mineral Resource Development Company (MRDC) was the final of several SOE to join the MSG in 2016.  Not only has this improved the level of transparency of SOE operations, but it has also resulted in opportunities to discuss how to better govern these SOEs.

Secondly, the Department of Petroleum and Energy has committed to improve its paper ledger licence registry into an electronic registry as recommended by the MSG. This reform is underway.

Another important achievement was the amendment proposed in the 2018 PNG National Budget to remove the secrecy provision of the Papua New Guinea Income Tax Act. Following this change in law, PNGEITI is now authorised to collect company tax information from the Internal Revenue Commission.

Several of the recommendations were related to revenue management. As a result, the establishment of an electronic payment system is underway within the Department of Finance, which will make it easier for the national government to monitor the timeliness and accuracy of collection of revenues from extractive companies. The Department of Finance has been further directed to monitor the opaque trust accounts including those holding and managing mining and petroleum revenue accounts.

Other directives stemming from the NEC Decision that are currently underway include the drafting of an EITI policy and legislative framework and a scoping study for the inclusion of subnational payments and transfers in the EITI Reporting. The draft legislation and policy framework are expected to be ready for the PNG government’s vetting towards the end of 2018. Subnational payments will also be explored through a scoping study commissioned by the MSG.

As Papua New Guinea is set to undergo EITI validation in April 2018, to determine where PNG has made meaningful progress in promoting accountability and transparency in the mining and petroleum sectors, there is an air of optimism that the levers are working harmoniously to prepare well for this assessment. The consensus is that the EITI helps deliver tangible reforms.

Head of the Papua New Guinea Extractive Industries Transparency Initiative (PNGEITI) National Secretariat Mr Lucas Alkan has commended instrumentalities involved to amend the Mineral Resources Authority Act.

Parliament last week passed the MRA Act 2017 (amended) with mining minister Johnson Tuke saying the amended legislation would enable enhanced government regulation of the mining industry.

The changes relate to functions of the Mineral Resource Authority (MRA), membership of the MRA board, reporting requirements, expenditure under the Public Finance Management Act, and financing and increased production levy amongst others.

Mr Alkan said timing was now ripe for changes in rules governing the mining and petroleum sectors of the economy.
“Changes in technology and the way people do business are so swift today and the petroleum and mining industry have their own challenges and opportunities.

“Papua New Guinea now is on a very unique position to be a model country to set standards that other miners and explorers around the world can learn from. The Solwara 1 Project in New Ireland and the Pasca projects are case in point.

“We are of the view that the industry and the government are living up to meeting immediate obligations and this must be further strengthened to see better outcomes,” Mr Alkan said.

“If there needs to fine tune certain legislation (s) and policy (cies), timing is now right to make things happen.

“We cannot afford to be able to brining it until the last minute” Mr Alkan said.

“We have world class technical expertise to make Papua New Guinea a model mining and petroleum country that strictly upholds global best practices whether it be in transparency or the overall approach taken in administering and regulating business in the mining and petroleum space.

“There is a whole scheme of things we need to harmonize before the economy and the investors’ alike can enjoy the full benefits of PNG’s resource.

He said work needed to move the sectors required greater cooperation between all stakeholders- to (particularly) put in place better fiscal and regulatory mechanism for the good of the industry and the economy at large.