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Old 09-11-2012, 10:17 AM
Cool_Guy1 Cool_Guy1 is offline
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6 billion kina Exim loan

I would like to raise some issue's regarding the K6 billion Exim loan from China. We have heard the government speak of the loan which will be targeted towards developing our infrastructure, but, that is it and there is no more details of the loan.

I have heard, most of the project funds would have a boomerang effect like that of AUSAID etc, with most of the construction activities to involve Chinese companies. Sketchy detail of the loan, and who sourced the loan and under whose advise is not known yet.

The proper process that i know of loan negotiations of this magnitude is for the Government to give its priorities to senior beaurocrats in the Department of Planning and Treasury to come up with a budget, which would set their objectives, either it be focused on education, health, infrastructure, etc. The beauracrats then set out a fiscal strategy that matches the desires of the current government. If the budgeted revenue is not sufficient, the beauracrats then return to the government and advise them of the short-fall, only then the government endorses the senior officials to negotiate external financing through commercial or concessional loans.

In this case, a budget wasnt put forth, and the negotiation of the loan seems a bit sketchy, meaning there is something wrong with the loan.

The talk along the corridors of Vulupindi house is that, the much talked about Sovereign Wealth Fund (SWF) is likely be scraped. This then brings to question, how will the loan be repaid and by when and how much?

History tends to repeat itself, as we seem to get sketchy picture of this K6 billion loan. In the past, when OK Tedi, Porgera, Misima and Kuutubu were about to start production, the Government negotiated a UBS loan, porpularly known as the "Cayman Island" deal, which tied down all mineral proceeds to the loan. For instance when dividends, royalties and taxes were paid to the Government, the first call on those payments was UBS bank, and the remaining were transmitted to PNG. Nobody knew what the deal was and who benefited from that deal.

With the talk of stalling SWF, i wont be surprised, the K6 billion loan would be tied down to the LNG project. If this is so, we are repeating history again. I might be wrong, but, i have put two and two together, where the government is no long interested in setting up a SWF, which tend to confirm my suspicion that, the K6 billion loan is tied down to the LNG proceeds, where the first call on the income would be the EXIM bank, while PNG gets what is left over.

The SWF was set up in three forms to benefit the people of Papua New Guinea, an infrastructure component, a budgetary support component and a future generations fund. SWF was set up to benefit the rest of PNG people. If the SWF is done away with to lock up future benefits for loan repayment, i guess PNG will remain poor while the wealth of this nation is ripped off and sipphoned by a few.
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