Reports, Recommendations, Reforms: How The EITI Is Improving PNG’s Natural Resource Management

EITI – An Essential Lubricant In PNG’S Resource Dependent Economy
September 20, 2018

Reports, Recommendations, Reforms: How The EITI Is Improving PNG’s Natural Resource Management

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.

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