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**** Speech by Hon. Peter O’Neill CMG MP, Prime Minister At the Papua New Guinea Advantage, Investment and Infrastructure Summit - Brisbane, Australia, 27 August 2015 ****
August 27, 2015
I thank the organisers of the Papua New Guinea Advantage Investment Summit for inviting me to deliver the opening address.
I understand this is a record attendance at this forum.
I acknowledge the outstanding work of Business Advantage, and the Port Moresby Chamber of Commerce, in organising the Summit.
Ladies and Gentlemen,
PAPUA NEW GUINEA TODAY – A BRIEF OVERVIEW
The outlook for Papua New Guinea is positive.
We are in a period of growth and economic expansion that has never been seen before in our country.
At the same time, our GDP growth, and other areas such government revenue, have been impacted by global factors beyond our control.
The downturn in the commodity prices is affecting Papua New Guinea and the 2015 Budget - just like other countries in the world.
The Government will be responsible in adjusting economic projections, including the 2015 Budget. We will continue to monitor developments in commodity prices, and undertake adjustments in a responsible manner. Our Government is determined to ensure that external factors do not impact on our core policy areas - of free education, the provision of universal healthcare, improving law and order, and investing in key economic infrastructure. Added to this, let me say this here today, there is no intention by this government to increase any new taxes in Papua New Guinea.
We will adjust downwards, economic growth that was projected at 15.5 per cent for to 11 percent this year. I am sure you will agree - this is still a strong outcome for any country in the current global economy.
The 2015 Budget will also be revised through a Supplementary Budget which will be introduced in October. We are deferring non-essential spending. Through careful management we will weather this economic storm and come through even stronger at the end of it. It is a wake up call for Papua New Guinea that we needed, given the excitement all the anticipated revenue coming from LNG and other mineral exports.
Ultimately, our key economic indicators are stable.
Inflation outlook for 2015 and 2016 is 4.9 per cent, which is a downward revision from the 2015 Budget estimate of 5.5 per cent.
This is largely due to low commodity prices, low imported inflation, and a continued tariff reduction program, as well as a delay in the implementation of the new excise indexation.
Headline inflation for 2016 is projected to grow at a rate of 5.6 per cent.
This is based on the assumption that commodity prices will improve in 2016.Despite what our critics may say, who are few in numbers, driven by a personal agenda and some with personal vendetta - we do not have a debt concerns. Even if I were Blind, we are nowhere near Greek style debt position. Quite frankly, this is insulting and a deliberate attempt to undermine confidence in our economy and our sovereignty.
Papua New Guinea’s public debt is estimated at 13 billion Kina, which is a debt to GDP ratio of around 33.2 per cent. By law we are limited to not going beyond 35 per cent debt to GDP, and we are currently operating within that Limit. We are one of the few countries in the world that have such a limit. This is a limit set during economic contraction that did not show any growth, and was designed to limit public expenditure - particularly on non-productive items.
Looking at this debt - 60 per cent is domestic debt, and 30 per cent is concessional from multilateral agencies such as the ADB and World Bank. The balance is commercial – but mostly loans are domestic. Papua New Guinea has never defaulted on its loan repayment and we maintain a Zero Default Policy. Debt servicing has the first call in the budget, and that policy will not change.
Despite the challenges we face in the global economy, our structures and priorities remain strong.We are more committed than ever to driving and encouraging private sector growth – and encouraging and facilitating foreign direct investment in our country. Added to this, one of the most important factors that will ensure Papua New Guinea is a secure destination for investment is our proven political stability.
Our Government was re-elected some three years ago.
Since then we have maintained a strong parliamentary majority, a united cabinet, and we have had goodwill and public support across the nation, this has been since 2011. We will go to the 2017 national elections as a united group, with plans for another five more years in government. Yes, the horse race in Waigani will be on, but I also know, on form, which horse I will be betting on. The days of short-term governments in Papua New Guinea are well and truly over. The climate for new investment and sound economic growth has never been better than it is today.
INVESTMENT DESTINATION PNG
As an investment destination, Papua New Guinea has a lot to offer as we meet the challenges of the Asia-Pacific Century. We are already making the right moves in this direction with the start of LNG production, and the second LNG project which is to come online in the coming years. Our LNG has a secure market in Asia and this will only continue to expand.
Last week at our meetings in India, with Prime Minister Modi and the business community, it was made clear that we have ready-made market in the Asian region, particularly in India.
The first LNG Project, with Exxon-Mobil, was delivered on budget and ahead of time and is now generating income for our country and our partners. This project is not the end of the LNG story in Papua New Guinea. Facts Global Energy, an independent observer of the industry, recently projected that there will be 4 to 5 LNG trains in Papua New Guinea by mid-2022, and potentially 6 or 7 trains by 2030. Their report finds that Papua New Guinea is in competitive position for LNG development and is set for expansion.
They note the high deliverability of LNG despite rugged terrain of our country.
In relation to investment, the report finds investment in LNG in Papua New Guinea has a low capital expenditure requirement, and the Government has a pro-development attitude.
Looking more broadly than LNG production, there are a number of other sectors where Papua New Guinea can meet the needs of the Asian markets. Clearly one of the greatest challenges facing the Asian region is food security. But to do so we need to re-align what we grow and produce to meet regional requirements and to meet the demands of the middle class in Asia. We also need to be able to get our produce to the markets of the Asian region much more efficiently.
Papua New Guinea’s supply chain capacity is increasing for the carriage of produce. This includes an upgrade of current port facilities, sea ports in Lae and Port Moresby and a new Port Moresby airport terminal to be constructed by 2018. This will continue to increase our air cargo capacity to Asian destinations.
There has been neglect in some of our key agricultural industries and we have work to do with our Government agencies in order to restore this capacity. We are restoring our production and export coffee, cocoa and copra.
Our government is building the infrastructure such as roads through our country that are needed to get these products to market. At a national level, our Government is also working hard to grow SME sectors to participate in the formal economy.
Broad-based growth of the SME sector is one of the most effective ways to ensure we can provide opportunity for our young people today and tomorrow. Our government is implementing a twelve-point plan to “grow” the SME sector.
This is focussed on affordable finance, making sure that we have business training and supporting the growth of key sectors.
There are significant opportunities for Australian businesses and entrepreneurs to partner with and mentor our own small business sector.
Ladies and Gentlemen,
One area where we, as a government, need to ensure there is improvement and progress – is in the generation of electricity.
We need to substantially lift electricity generation if we are to continue to increase opportunity for business and communities in our nation. This must be through a range of energy sources including at solar, hydro, geothermal and LNG. Already in Port Moresby we have tapped into LNG for power production.
Again, we thank our partners for making this happen.
Since we switched on electricity generated by LNG in July, load shedding, is a thing of the past.
This means businesses can function better, food can be stored properly and children can study in the evenings. We need to ensure that 80 per cent of our population and our SMEs have access to affordable power. This will drive growth and dramatically increase our capacity as a nation.
SOME KEY GOVERNMENT INITIATIVES NOW BEING IMPLEMENTED
Before I conclude, I want to briefly mention some key national government measures now being implemented. I know business is interested in these policy areas. Legislation establishing Papua New Guinea’s Independent Commission Against Corruption has been gazetted. The establishment of the Commission is now receiving high priority. No government since independence has given such a commitment. Legislation will be presented at the upcoming session of Parliament, and when it comes into force, will lead the fight against corruption at all levels, in both private and public sectors. It will be totally independent, free of any political, tribal and regional influence. In Papua New Guinea there is always a lot of finger pointing. And largely it is due to the fact that we have 800 plus languages and culture, and do not have written history and there is a lot of story telling.
When you have a bit of success - you become a big target.
We need structure that is driven by facts and evidence based, that is open and is transparent. Today, I say this to you, many who do business in Papua New Guinea - that you have a Government that deliberates on every issue in a very lively, constructive and fair manner. You absolutely do not need to engage with anyone for advantage - there are no favours in Cabinet or in Parliament.
Everything has to be on merit. Also, the legislation to establish a Sovereign Wealth Fund has been approved by the Parliament in the last session.
The Fund will ensure the careful and transparent management of the significant revenue inflows from the development of our resource sector. This is especially so for our LNG and wider gas and mineral sector. Legislation to manage the state’s holding in mining, oil and gas developments has also been passed.
This is the Kumul structure. It will ensure greater independence, transparency and accountability for state owned enterprises in a range of sectors including resources. The Government has further embarked on significant institutional reform led by the establishment of a National Procurement Authority. This will better manage the awarding and implementation of government contracts. Taken together, these measures represent dramatic and ground- breaking changes that will deliver better and more accountable government well into the future.
Again, these measures will reduce corruption and abuse and misappropriation at all levels of Government and in the private sector.
Ladies and gentlemen,
Papua New Guinea is a fast growing and confident nation.
Our economic foundations are very secure, our democracy is very healthy, and the optimism of our people is very bright– these all provide an excellent basis on which we can grow our trade and investment in the country. There is a sound basis for this confidence – our people know that we are investing in the future for them. No country has ever achieved a transformation in its GDP and its Development without investing in education and health.
This is absolutely necessary to empower our citizens. Together, with its investment in security and infrastructure will propel our economic growth, we are laying the foundations for rapid development of our country. In the last election, I promised my people free education, free basic health care, a safer country, better infrastructure and stronger economy. And after 3 years, I am more focused than ever on delivering that promise.