PM O’Neill – PNG and Petroleum Investment Conference

I again thank the PNG?Chamber of Mining and Petroleum for giving me the honour of opening what has?become a premier investment?event for Papua New Guinea.

I am advised the?response has been exceptional.??A broad?cross-section of the Australian resources sector, investment community, and?other stakeholders are attending this Conference.

I welcome you all.

It would be remiss of?me if I did not thank the President, Chief Executive and Members of the Chamber?of Mining and Petroleum, for your?co-operation and support.

In my presentation?today, I want to make brief comments on some key areas that I know you will be?interested.

I will discuss not?only the successes of our nation, but be frank and open in relation to areas?where there has been challenge, or even?some neglect ? and tell you what our?Government is doing now to rebuild this so we can have a better future for our?country.

I will conclude by?outlining proposals on how our government, the resource sector, and landowners,?might achieve a new era of co-operation, stewardship and partnership.

(POLITICAL STABILITY)

I want to begin today,?as I have done on other occasions, by commenting on political stability and its?critical importance to our future.

The government I lead?has overwhelming parliamentary support ? and our ?underlying? political?stability remains strong.

Last week we secured?the passage of the largest budget in our nation?s history, with expenditure of?16 billion Kina, and there is other?important legislation before the Parliament,?including the Sovereign Wealth Fund, that will further strengthen the economic?future of the?nation.

As we move our nation?forward, stability is key.

There is no doubt?that there have been some political disturbances from outside the parliament?this year that has caused some??confusion? to the casual spectator?but this is?far from being an issue relating to stability.

For any long-term?observer of Papua New Guinea ? they will know that this is just part of the?robust nature of our democratic political?process.?

Certainly there is?never a dull moment, fortunately we have a very capable judiciary that?addresses such matters and deals with false?claims.

These events have the?potential to concern some new investors, and can unsettle some in our own?business community as well.

The assurance I give?you is that in our country we manage our political interaction in a way that?does not damage ?good government.???We?manage these issues in a way that does not undermine investor confidence or?harm business certainty.

These attempted?distractions might keep the lawyers busy, but for the government we get on with?the job of managing the economy and?improving quality of life for our people.??This is the mandate that our people have?given to us as elected Leaders.

As Prime Minister I?have always regarded the maintenance of political stability and business certainty?to be one of my key responsibilities.?

We are now well into?our third year of benefiting from that certainty ? and I am confident we will?continue to do so until the people of?Papua New Guinea have the opportunity to?judge our government?s performance at the 2017 national election.

(SOUND FISCAL MANAGEMENT)

One of the core areas?of interest for is fiscal management ? particularly in the context of the?overall global economy.

Overall, our economic?management has been sound. We have maintained our credit rating, our kina has?strengthened, our balance of?payments position has improved considerably ? and?it will continue to do so.

Inflation will be a?challenge next year given our projected record GDP growth.??While we can be proud of having among the?highest GDP?growth in the world, we are mindful of the side effects of that?growth.

The national budget of 2015 again significantly boosts?spending in basic services that are improving the lives of our people, and?building?our socio-economic infrastructure that is critical for ongoing?economic growth.

I want to reaffirm our government?s commitment to?improving basic services, and building a infrastructure in a careful and?sensible?manner.?

This includes record investment in free primary education,?free universal health care, and expanded skills training our people.

The budget provides substantial outlay of 3 billion Kina?for important infrastructure that is vital for rural communities, such as roads?and?bridges, as well as electricity and clean water. We are also lifting?spending on affordable housing, and on urbanisation related issues.

The delivery of these Government services is being done through?a delivery mechanism that devolves the actual implementation to the?levels of?government that is closest to the people.

This transfer of decision-making on services, and the?delivery mechanisms to district administrations, and the local and community?level?government, remains very much a work in progress.?

Again I want to stress, that this is empowering?communities not to just make good decisions on spending, but to do this?effectively.

A significant share?of the increased spending on infrastructure under our government is directly?benefiting the resource sector, and?business and industry generally.

A good deal of our?borrowing has been specifically directed at infrastructure work that will?improve the efficiency and competitiveness of?our key export industries ??mining, oil and gas, and agriculture.

This is a sound?investment for our economic future and our community?s future.

A further area where we?are significantly increasing spending, and one I know is of interest to this?Chamber and the business community,?is law and order.

We are making a real?difference when it comes to police training and police discipline; the rehabilitation?and reform capacity of our?correctional services; and, our judiciary is better?funded than before.??We are investing in programs?that make our communities safer and?this will have flow-on benefits for?business as security costs reduce.?

Our common enemy will?continue to be one of perception.??Crimes?occur in every country in the world, and while I acknowledge we have a?lot of?work still to be done in this area, the situation in Papua New Guinea is rarely?as bad as the media will make it out to be.??This is a?real challenge for us all.

Our Government will?continue to manage and improve communications through global and regional media?to more accurately manage?negative perceptions of our nation and our people.

In concluding my?comments on fiscal management, I do want to acknowledge in an unqualified way,?our prudent borrowings in recent?years.

We have done this?because we have the certainty of the revenue inflows in the future.?

As an economy ? and as?a nation ? we are taking action to improve the quality of life of the people.??Our Government is rebuilding the?infrastructure that has been so badly run-down.??That is to say ? we are starting from ?ground zero? in many instances.

After decades of?neglect, our proactive approach is right for Papua New Guinea today and for our?nation?s future.

(PUBLIC POLICY CONSISTENCY AND CERTAINTY)

Before I comment on?our petroleum and our mining sectors, I want to address one other issue which I?know concerns the Chamber, as?well as our current and potential investors and?financiers.??It most certainly concerns?our own business community, at all levels.

And that issue is??policy consistency and certainty?.

Papua New Guinea is a?young democracy with a young bureaucracy?..we should not forget that, but our?capacity continues to improve?at every level.

But we know that the?management of major investment at all levels of government can leave much to be?desired.??Considering our?bureaucratic?history ? we can offer an explanation, but not an excuse.

As Prime Minister, it?is my responsibility to ensure that we manage the approvals processes for all?projects ? large and small ? in a way?that is fair, effective and transparent.

Those of you who have?made representation to our government, both on individual projects and on major?policy areas such as resource?taxation, have always found an open door, with an?open mind.

We understand?concerns about policy consistency and policy certainty and we share those?concerns.??But what I ask for is your?patience?and your co-operation as our Government seeks to deliver certainly.??

I want you and all?investors ? and other key stakeholders such as landowners ? to have the policy?and process certainty that you deserve.

I have been?encouraging my minsters and departmental heads, and senior officials to?appreciate the impact of delays in decision-making?process.?

Poor decisions, and?even total neglect of decision making, is harmful not just to the projects, but?to Papua New Guinea and our future.

As you know we are?living in a more competitive regional and international environment.

The recent free trade?agreements Australia has concluded with Japan, Korea and now China, are some?examples of increasing?competition.

Regional free trade?and investment and business co-operation agreements are very much welcome ? but?they also present Papua New?Guinea with some real challenges as we work to meet?those obligations.

But these are?challenges that we must meet if we are to meet our socio-economic objectives.

We must ensure efficiencies?and transparency in the investment approval process.??We must facilitate reasonable and affordable?incentives such as visa and work permit approvals, land title certainty, access?to efficient infrastructure, and of course certainty when it?comes to taxation,?royalties, and fees.

Our government is also?working together to strengthen processes and train staff to better facilitate?business and investment administrative?processes.

We don?t just need?our resources and construction sector, companies to be more efficient and be?competitive, but of course the?government ? and all its agencies ? must be more?competitive and efficient as well.

We need to embrace?this by the public sector as much as by the private sector.

Our goal, in the year?ahead is to deliver a significant improvement in the way all government?departments and agencies ? led by state?ministers ? manage the approval?processes for large and small projects.

A key part of that?will be increased and more constructive interface between project proponents with?state ministers and departmental?heads ? from the beginning to the conclusion?of projects.

This will also?involve a better engagement ? again from the outset ? with provincial, district?and local level government, as well as?landowners and communities.

As we develop this?significant policy program, we need the support and the full engagement with?our existing resource sector owners and?developers, with new investors, and?with construction and service providers in these sectors.

(DELIVERING A WORLD CLASS RESOURCE PROJECT ON TIME)

The PNG LNG Project ??our first gas project is now delivering high quality LNG to an energy-starved?region and beyond.

This has been well?publicised and is a great achievement for our nation.

I know other speakers?will be discuss this project in some detail – but I do want to make one point.

The completion of?this project, ahead of time and with a relatively smooth construction phase, has?already delivered massive benefits to?Papua New Guinea.?

Most importantly, the?completion of this project has ensured our standing as a nation ? that is?capable of managing major, world class?resource development projects, was?confirmed and enhanced.

We have delivered ? and?we have stared-down the doomsayers who just a few years ago talked about the?project being a ?pie in the sky.???

Some critics even said?the project would not happen ahead of major other projects in our region such?as Gladstone.

Well, by working?together, we have proven them to be just plain wrong.

We all know now that?in many ways the PNG LNG Project sets the benchmark for the future.

I applaud the?achievements of Exxon Mobil and its partners, including Oil Search and Santos,?in delivering our first LNG project so?successfully.

I also thank?predecessor governments and ministers, and our Senior Officials, who helped?deliver this great project.

I also thank?landowners, local communities, and a skilled and committed workforce ? the?majority of them Papua New Guineans ? and the?construction sector for making?the delivery of this great project a reality.

However, there must?be no resting on this achievement.

We need to move to?the next stages of the development of our vast petroleum resources.

I welcome the?statement by the partners in the Elk-Antelope gas field project in the Gulf?Province outlining their confidence in the project?and highlighting just how?massive it will be.

The government is?very keen to move this project forward with train three ? we expect the?proponents to realise the aspirations of the?Government in the coming months.

This means that we?all need to make some critical decisions have to be made.

Our experience in?negotiating and helping to implement the PNG LNG Project will be invaluable in?this process.

As many of you will know now, there are other gas?projects on the horizon as well??.some are stranded projects, with special?needs.

What we want to in 2015 is the furtherance of those potential?projects ? and a real focus on the downstream processing.??We want to?value-add to the development of?our petroleum sector and resources to the greatest possible extent.

We also want domestic gas development to help the?government meet its objectives to deliver affordable energy to our people, and?especially our rural majority, and to our businesses and industry as well.

We have had some positive discussion with some of the?resource development companies and I expect some progress in the months?ahead.

(THE CHALLENGES FACING THE MINING SECTOR)

Ladies and Gentlemen,

The contrast between?conditions in our petroleum sector and our mining sector this year could hardly?be greater.

Continued low?commodity prices for some of our key exports have seen a slowdown in the mining?sector that has had widespread?consequences that we are all aware of.

The government is?fully aware of that, and we have taken a responsible and reasonable approach?when it comes to the conditions relating?to capital expenditure and licences.

We want to see our?mining sector grow just as soon as conditions, most of them beyond our control,?improve.

In the meantime we?will continue to work with individual companies, both existing operators and?new project proponents alike, and with?the Chamber.

I understand fully?there may still be tough times ahead for the mining sector globally ? not just?in Papua New Guinea.

I saw a report from a?leading economic forecasters just a few days ago predicting that mining?investment in Australia will decline by a?further 40 per cent over the next?four years.

We cannot totally?isolate Papua New Guinea from a depressed mining sector regionally and?internationally.

What we can do is?improve our approval regimes, address our own infrastructure needs, and?maintain a stable political environment that?is conducive to attracting new?investment while maintaining the confidence of our current project owners and?operators.

Where we can provide?affordable and reasonable incentives I am happy to consider proposals and work?with state agencies to implement?these proposals.

We must ensure our?mining sector has a strong and secure future ? we must work together to?confront the challenges together.

(THE GOVERNMENT, THE RESOURCE SECTOR WORKING TOGETHER TO GROW PNG OWNED?BUSINESSES)

That brings me to the?final point I want to leave with you today.

As you may be aware, our?government is implementing a twelve-point plan to significantly grow our Small?and Medium Enterprises.

For a nation of over?seven million people, we have a very small SME sector.

Today we have just?50,000 small businesses ? and that number includes sole operators, many of whom?have limited facilities and?resources.

I believe the great?majority of our people would welcome the opportunity to start and operate a?small to medium sized businesses.

The national?government has a duty to effectively encourage and support the development of?our SMEs.??With the involvement of our?people in the ownership and management of enterprises and the support of the?private sector we can achieve that.

As a government we?are providing greater access to affordable finance for Papua New Guineans who?want to start up, or grow, a?business. We are also offering other support such?as training and extension services.

The wider role the?national government must play is to help grow and nurture the sectors of the?economy that are conducive to greater?national involvement.

The obvious sectors?are tourism, retailing, village based industry, IT and service areas, and?agricultural and fisheries and of course?downstream processing.

I want to challenge?you today to include the mining and petroleum resource sectors as well.

One of the criticisms that I frequently hear about the?development of mining and petroleum sectors is that nationally owned small to?medium businesses are excluded or simply ignored from contracts, and supply and?service areas.

The argument that an enterprise needs to be a particular?size, and have a certain level of capacity is valid.

But the response needs to be more positive and?pro-active.

I want to see the resource sector, and major contractors?and suppliers, actually helping existing and future SME owners to ?grow? their?businesses, and their capacities.??We?want to see them compete for contracts, and for supply and service work across all?sectors.

And by this I do not mean a token support ? I mean a?substantial engagement from the outset for new projects, and new engagement for?existing projects.

We have in mind the national government playing a role in?helping facilitate for a working arrangement between the resource developers,?and the major contractors, and our SMEs.

By working together, resource project owners and managers?can play a very constructive role in helping the government to achieve one of?its core goals ? that is growing our nationally owned small to medium?enterprise sectors in the country.

It will certainly?bring the resource sector and the business community into having a closer and a?beneficial relationship with our people. It?will certainly improve the standing?of resource companies among our people ? it will contribute to a broadly-based?economic development?for our country.

I welcome your?feedback on these issues.

Before I conclude I?want to affirm our government?s position, our support and our confidence in the?work done in our communities, and of?course the support for many of our charitable?organisations and sporting organisations by resource companies in the country.

Some recent attacks?by some respected Australian university on the corporate record and standing of?our corporate citizens was?disappointing.??It is plainly wrong as well.

I applaud the?contribution of the resources sector as a good corporate citizen in Papua New?Guinea, and I applaud the massive?contributions to sporting organisations and?charitable organisations in the country.

I welcome the?initiatives ? and I encourage other companies to do the same ? so that these?projects and this support continues to benefit?our rural communities and our?children, and our people as a whole.

(CONCLUSION)

Papua New Guinea?remains a sound and secure nation in which to invest and to do business.

With our first LNG?project we have the runs on the board ? and more runs are being scored as we?meet today.

We can and we must?build on our success ? and we cannot do it without high level of quality?overseas investment, foreign management?and expertise.

Papua New Guinea will?enjoy record GDP growth in 2015.

That will be a major?achievement ? but it will be much less of an achievement if we do not build on?it.

That is where you and?your colleagues come into play.
I invite you to come into PG and help us in building a strong, secure and?harmonious Papua New Guinea?.and in sharing the benefits?that will bring to your?businesses, as well as our seven million Papua New Guinean men, women and?children of our nation.

I wish you every?success in your deliberations.

Thank you.

 

 

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