“The booms and busts of the resource sector have damaged our economy for too long. There are ways that can minimise these damages by smoothing the ups and downs of revenue and foreign exchange flows from resource projects. One effective way is to have a good Sovereign Wealth Fund. This can help save excess revenues in boom years and then release the funds in years when commodity prices and revenues are low. However, and this is a very major condition, any SWF must be robust and transparent. There are good SWFs, and there are bad SWFs. We don’t want the current SWF where Prime Minister O’Neill can raid PNG’s resource flows and divert the moneys to his besties” stated the Shadow Minister for Treasury and Finance, Ian Ling-Stuckey.
“PNG has been burnt in the past through the abuse of PNG’s first SWF. This was called the Mineral Resource Stabilisation Fund. While this fund worked well initially, it had a loop-hole that meant its funds were raided in the late 1990s. We should never make this mistake again.
“However, as highlighted in analysis by Professor Satish Chand for the National Research Institute, the form of SWF passed by the Parliament in July 2015 has serious defects. Professor Chand concludes “the withdrawal formula fails to achieve the stipulated aim of macro-economic stabilisation and could do the very opposite”. He also concludes “the opaqueness of the formula for withdrawals from the SWF is to the cost of transparency that is necessary for public scrutiny” (extracts shown below).
“These are major defects of the current SWF that O’Neill is so keen to put in place but could do more damage to PNG than good. The fund allows Kumul Petroleum Holdings Limited (KPHL) to retain half of the dividends and other moneys from the PNG LNG project and any future Papua LNG project. These funds don’t come into the budget process. There is not the healthy budget policy competition to judge whether such funds should go for health, education and infrastructure, or instead should fund the government buying into schemes such as the extraordinary Oil Search share fiasco which cost PNG over K1 billion or the Nautilus fiasco which has cost another K400 million in losses” stated the Shadow Treasurer.
“Even the Final Budget Outcome indicates that KPHL has deliberately withheld K248 million in 2018 “to pursue State’s equity participation in the emerging petroleum and gas projects”. However, in the recent announcement on the poor fiscal terms for the Papua LNG project, Prime Minister O’Neill and his fake Treasurer stated that PNG’s 22.5% would be entirely financed by a special financing facility. So where has the K248 million gone? And with the recent games in the publication of Kumul Petroleum Holding’s annual reports, we know there is a total lack of transparency in how such funds are used. As the FBO states “KPHL accounts are not included in the Government’s accounting framework for budget purposes.”
“Unfortunately, the revised SWF pushed through by Prime Minister O’Neill allows for him to divert funds away from budget priorities such as health, education and infrastructure and give it instead to his pet projects. This was highlighted as a major concern in earlier analysis by the National Research Institute and other independent observers. PNG needs a more robust and transparent SWF than the current design. The Alternative Government can give the people of PNG a better SWF to meet the needs of our people” said Mr Ling-Stuckey.
Following is the Summary of an analysis of the current PNG SWF by Professor Satish Chand for the PNG National Research Institute available at the NRI Website
Following is an extract from the 2018 Final Budget Outcome released by the Treasurer on 31 March 2019 (page 17) available on the Treasury Website
Shadow Minister for Treasury & Finance
25 April 2019