admin

Left to Right: PNGEITI Head of National Secretariat Mr. Lucas Alkan, PNGEITI MSG Acting Chairman Mr. John Uware , JICA Chief Representative Mr. MATSUOKA Hideaki, and Mr. Channan Kumalau of the Department of Petroleum after the signing today.

PORT MORESBY: A three-year technical cooperation between the PNG Extractive Industries Transparency (PNGEITI) and JICA will boost data transparency in the PNG Mining and petroleum sectors.

This will be made possible with the signing of “Record of Discussion” between PNGEITI Stakeholders and JICA experts undertaken in August this year.

The Record of Discussion which forms the basis for the execution of the technical cooperation was signed in Port Moresby today by Mr. John Uware who is acting Chairman of the PNGEITI Multi- Stakeholder Group with Mr. Matsuoka Hideaki from the JICA side.

This signing marks phase two of the JICA/PNGEITI technical cooperation aimed at Improving Resource Related Revenue Management through enhanced EITI Reporting. This second phase will commence in March, 2024.

The PNGEITI Head of National Secretariat Lucas Alkan thanked the Government of Japan through JICA for its continued support in the Government of PNG’s effort to implement the EITI Global Standard to improve extractive sector governance. He acknowledged JICA for coming on board for the second time to help improve extractive transparency which is the core mandate of the EITI – in the PNG Mining and petroleum space.

“PNGEITI is happy that we’ve signed on the record of discussions that was conducted within the month of August by JICA experts”, Mr Alkan said.

“The second project will be undertaken by JICA experts to continue building and improving capacity at the Department of Petroleum and Energy from work that was undertaken in Phase 1 of the project and at the same time, focus on building capacity at the Auditor General’s Office to improve financial data quality, reliability and timely availability of resource related data and information for public use,” Mr. Alkan explained.

The Head of PNGEITI Secretariat said that the three-year program would basically pick up from where JICA had left off at the Department of Petroleum and Energy when Phase 1 of the project ended a year ago and determine ways to improve the quality of the financial data for EITI reporting and to ensure that more resources-related information is made publicly available for transparency purpose as required by the EITI Global Standard. The project is also intended to assist strengthen capacity at the Auditor General’s Office to ensure that the financial data that are used in the EITI annual reports are audited and are reliable to improve the quality of these reports.

Mr Alkan said the JICA technical cooperation program in that it will specifically focus on building and strengthening capacities at two key government organisations; the Department of Petroleum and Energy and the office of the Auditor General. Addressing weaknesses in data reliability and quality in these two agencies would be important to the work of the PNGEITI Secretariat in its endeavour to addressing the data and information gaps as highlighted through the EITI reporting process.

Present during the occasion included key representatives from beneficiary government entities, namely the Department of Petroleum and the PNG Office of the Auditor General.

ENDS.

Approved for Release by Mr. Lucas Alkan

PNGEITI Head of National Secretariat

The PNGEITI Head of Secretariat Mr. Lucas Alkan says all parties to the Pogera Mine must adhere to rules governing the extractive industry, particularly when dealing with fiscal matters that must be administered and observed according to law. His comments follow a news article on The National citing the Internal Revenue Commission (IRC) that unmet tax obligations of the Pogera mine stood in the way to expedite the mine re-opening process.  Mr. Alkan says a workable and timely strategy that does not impinge on basic laws is a way forward.   Below is the full comment on this issue. 

“The Papua New Guinea Extractive Industries Transparency Initiative (PNGEITI) commends The National newspaper for attempting to bring to light what appears to be the final outstanding issue (among others) in the Porgera Mine recommencement negotiations (more on this in footnote). We’ve noted from the reporting that taxation matters are legacy issues that appear to be standing in the way for the multi-million-kina Porgera Gold Mine to re-open.

We have observed that the Government was on track to conclude negotiations and re-open the Mine by June last year, however this did not eventuate as anticipated. Attempts to reopening the Mine in the second half of last year was not feasible due to the national general elections and the formation of government. It appeared that all negotiations were concluded and a new Porgera Mining Agreement Framework was in place for the Mine to be re-opened in the first quarter of this year.

Surprisingly, we learn that an old Porgera Tax liability dispute is standing in the way for the Mine to be re-opened. The early recommencement of the Mine, preferably within the first quarter of this year is critical for the country as the lead time required for mobilizing resources and the significant start-up capital needed to get the mine back into its full operating capacity would be a significant challenge. On this, we are aware there are also discussions going on with the developer and the government as to who is going to meet the startup cost but we understand Barrick Niugini Limited might meet the full cost of starting up the Mine and government would refund later but unsure as to whether this understanding has been reached or not yet.

With regards to the current standoff, the EITI based on its global best practice principles is of the view that the existing law governing taxation matters must dictate or take precedence over any political intervention. We do not know the specifics of the on-going tax matter but understand that it is related to a tax dispute concerning the ‘old Porgera Mine’. If it is a significant amount of tax owed by Barrick to the Government based IRC’s audit in 2013 then it is a legal tax obligation that Barrick and its joint venture partners need to settle as required by law.

We fail to understand as to why the old Porgera tax obligation/liability clause was inserted into the new Porgera Mining Framework Agreement making it a condition to resolve this legacy tax issue before reopening the Mine. If whatever was reported and commented by PM Marape recently is true then Barrick Niugini Limited and the State need to speed up the negotiation process and resolve this dispute immediately. Both parties should exercise good faith – Barrick Niugini Limited should not pull strings on this old Porgera tax liability matter and delay the re-opening of the Mine. It is understood the State (IRC) may not easily forego if there is a substantial amount of tax liability to be paid by the operator.

Whatever the parties decide to do, they should resolve the tax liability issue through the due process of law but allow the Mine to re-open immediately under the New Porgera Framework Agreement. Political intervention is not recommended to resolve this dispute as this can undermine investor confidence, set bad precedence for the Government and create an uneven playing field for project developers. Barrack Niugini Limited should not put undue pressure on the State to resolve this matter politically in order to re-open the mine as it is not a best business practice.

All stakeholders and the citizens have the right to know the specific issues or the nature of this tax liability issue between Barrick Niugini Limited (BNL) and the Internal Revenue Commission (IRC) as the continued delay in re-opening the Mine continues to have negative consequences on the economy.  The prolonged delay has not only resulted in significant revenue loss to the Government (including the provincial and local level governments in the impacted resource area) but also loss of employment, business opportunities and spin-off benefits to the landowners and the wider communities.

The shutting down of the Mine 3 years ago has had significant negative consequences on the economy including the current foreign exchange shortage that has constrained business operations in the other sectors of the economy. Porgera Mine had been a good source of foreign exchange inflows and its continued shutdown will definitely not going to contribute to the 4% economic growth (that was largely to be driven by the extractive sector) projected for by the World Bank for last year and the real GDP growth of 4% projected for this year in the 2023 National Budget.

PNGEITI commends the transparent negotiation process to date that took substantial amount of time and effort to ensure the interests of all parties were reflected in those agreements. We encourage all parties to continue to respect and observe the laws of the land in this dispute resolution process to address the tax liability issue. We believe that a win-win situation for both parties (Government and Barrick) is to re-open the mine first and work together to resolve the outstanding tax liability dispute later going forward.

ENDS.

Note: This article was initially written for The National newspaper as response note to media query.