Emerging Pacific Leaders Dialogue Conference, Brisbane 28 June 2006

Transcription

1 Emerging Pacific Leaders Dialogue Conference, Brisbane 28 June 2006 PNG Sustainable Development Program Ltd : Promoting development that meets the needs of the present generation and establishes the t foundation for continuing progress for future generations of Papua New Guineans Robert Igara Chief Executive Officer PNG Sustainable Development Program Ltd 1

2 Introduction Thank you for invitation and for opportunity to speak about PNGSDP Ltd and share experience. The basic challenge facing PNGSDP How to promote sustainable development in Western Province based on the revenue streams derived from the operations of the Ok Tedi Mine. Some EPLD participants will visit several major resource project sites including the Ok Tedi mine, the Lihir Gold mine, and Oil Search s s Oil and Gas field operations in PNG next week. These visits will highlight the challenges of developing and managing resource projects and of promoting sustainable development within local communities, provinces and in nation-building. The strategy adopted by PNGSDP highlights application of a business/capitalist model, raises questions about role of major resource enterprises in promoting development as well as questions about current international development aid delivery model. 2

3 Ok Tedi Mine Porgera Gold Mine Ramu Nickel Mine Lihir Gold Mine Oil & Gas Fields Western Province Kainantu Gold Mine Tolokuma Gold Mine Bougainville Copper Mine* Misima Gold Mine* Port Moresby Major mining and petroleum project sites 3

4 Ok Tedi Mine Western Province Largest province in land area. Land Area: 97,000 km2, Landform: 0-3,000m, Fly River 700 kms. Population: 106,000 (2000 census), Population Density: 2 person per Sq Km. Urban population 35,000 Kiunga Per Capita Income: >70% less than US$ 20 p.a Annual Rainfall: 1,500-8,000mm Economy: copper, gold, timber, rubber, fish, and crocodile skin Gross Forest Area: 7.8 mill. Ha with 4.9 m Ha production forest. Borders Indonesia province of Papua and northern border of Australia. Second largest beneficiary of national government resource transfers and very heavily dependent of Ok Tedi mine revenue Very poor infrastructure, health and education services. Very weak provincial government. DARU Australia Immediate closure of mine would create a crisis in the province. 4

5 Background In 1994 and 1995 legal action was taken against Ok Tedi Mining Ltd L and BHP in the Victorian Supreme Court and National Court of PNG seeking compensation for environmental damage. In August 1999 OTML released a report acknowledging mining activity had caused serious environmental damage to the Ok Tedi and Fly River systems. In 1999 PM Morauta invited World Bank to provide independent advice. The WB stated: From an environmental standpoint, the best option is to close the mine immediately. But from a social standpoint this would result in a potentially disastrous situation because there was no preparedness for mine closure. BHPB decided to exit OTML. PNG Government, WP Government and Communities wanted mine to continue. Agreements signed in December 2001 and came into effect early 2002 addressed BHPB s exit, Ok Tedi Mine s s continuing operation, provided for mine closure from 2010, and created PNGSDP. Agreements required Community Consent under Community Mine Continuation Agreements (CMCAs). BHPB gifted its 52% interest to PNGSDP under certain conditions. 5

6 Ok Tedi Mining Ltd Now 82% owned by PNG interests with Inmet Mining Ltd of Canada having 18% interest. State interest of 30% consists of: 15% National Govt,10% Western Province (under control of National Govt), 2.5% Western Province Government, and 2.5% Mine Lease Landowners Contributes >10% of GDP and >18% of total PNG Exports Total sales revenue from copper, gold and silver exports of US$ billion in 2005 making it largest single contributor to PNG revenue. Production copper: 200,000 tonnes per annum; gold: 500,000 ounce per annum. Comprehensive environment monitoring. New strategies to address sedimentation and Acid Rock Drainage under consideration. Ok Tedi Financial Assurance Fund for Mine rehabilitation and restoration liabilities at mine closure required to be US$ 100m. Balance of US$ 40 m as at 31 Dec05. 6

7 Ok Tedi Mine 2 Economic benefits to PNG about US$ 400 m consisting of - Tax to Govt of $ 90.5 m, $ 11.8 m as payments to CMCAs and others, $ 246 m as dividends to PNG Shareholders (PNGSDP, PNG Govt, WP and Landowners), plus salaries and other goods & services. 1,974 employees of which 1,856 (94%) are PNG Nationals. CMCA Payments - From , 2005, total US$ 47 m paid to Community Trusts WP Government Revenue - Around 95% of revenue for WP Government derived from OTML of about K 20 m per year since 2002 (excluding dividend income) Mine life - now extended to Possible to Substantive extension would subject to addressing environmental impact and stakeholders approval. 7

8 About PNGSDP Ltd. PNGSDP owns 52% of OTML, but does not control or manage mine. Incorporated in Singapore 21 October 2001 as not for profit Company with head office in PNG. Not subject to direction or control by BHPB or PNG Government Three main functions- Shareholder of OTML ensure responsible management and operations Prudent & wise investment of Long Term Fund and Development Funds Promote & Support Sustainable Development especially for Western Province to mitigate impact of mine closure. 8

9 FUNDS STATUS and ALLOCATIONS Funds Status Since 2002 to end Dec 2005, total dividends received from OTML: approx. US$ m. Two-thirds of Dividend to Long Term Fund, and One-third to Development Fund. Long Term Fund: US$ 175 m Development Fund: US$ 82 m Western Province Program Fund National Program Fund Purpose of Funds: US$ 28 m US$ 54 m Long Term Fund - low risk investments mainly off-shore. Some for strategic low risk investments in PNG. Use for sustainable development projects after mine closure for 40 years. Funds Managers - Newton Investment Management Ltd, and Schroders, both out of London. Development Fund for sustainable development projects before mine closure. 9

10 Considerations for Delivering Development and Investment Initiatives Sustainability Issues economic, commercial, financial, social (land, labour, services, participation), environmental, infrastructure (physical), technology, human resources (workers, managers, entrepreneurs, public service adaptation to promotion vs regulation), and competitiveness. International Standards and Expectations,, WB/IFC, APEC, Banks ( Equator Principles ), EU/ACP Agreement, the NGO and Green lobby, international media especially impact of information superhighway and TV. UN also highlighted poor implementation most important constraint for development strategy. Country Risk Issues Managing political instability, Rule of Law, negative perceptions, prejudice and ignorance. Business Partner - Identifying business partner, securing development and investment finance, exporting to overseas market Papua New Guinean Participation - as employees, business owners, entrepreneurs, for present and future generations. 10

11 Strategy on Sustainable Development Project Investments Board considered effective approach to delivery and sustainability is through the Business investment model along lines of successful nucleus estate outgrower model. This involves confirming the core business investment to be operated as a commercial enterprise, and then identify the outreach in the form of village- holder production or service delivery. The core commercial investment will be funded from equity and loans, and the development component out of development funds in partnership with government and other development partners. For a new venture Establish proposed company to own and operate venture, and Company will then proceed to operate business as an independent entity 11

12 Strategic Programs and Initiatives Community-level Target Programs Community Sustainable Development Program (CSDP) want to support community economic initiative PNG Microfinance Ltd first commercial mf company.. Bank of South Pacific and IFC as partners. First direct equity investment by IFC in PNG. EIB and BASIX. Major Projects & Investments Economic Projects: Agriculture Rubber, Oil Palm, Cashew Nut and Coconut Forestry model sustainable forestry development and plantation forestry Fisheries barramundi habitat conservation, and restocking Tourism community and high value market N.Aust/W.Papua/PNG region market Infrastructure: Electricity, communications, transport, water and sewerage Study of WP and interested nationally if invited by Government Technical Education Star Mountain Technical Training Institute Delivery Model and Vehicles Community Programs Churches, NGOs, Business enterprises, and Local-level level Government Major Programs Subsidiary companies PNGMFL, PNGSEL, PNGSIL, PNGSIEL, PNGSFL 12

13 Example One - Community Development Programs This program enables PNGSDP to work with communities to support village organisation, provide small but valuable contribution, strengthen confidence and enable hope. Same time, while we must address the future, we also support immediate needs and life & death issues including through medical equipment supply, community empowerment, community primary education, rural water supplies, communications and power. Dr Daniel Priest It made a big difference to us to know we had good surgical suction, good anesthetic suction and suction for the t baby. This lady needed blood urgently. We had to transfuse blood. We tested (cross-matched) at least 7 people and of those we found that 2 were HIV positive giving her HIV infected blood would be a disaster! When we arrived one lady was in labour. The whole village had just lost another the previous week. The lady delivered in total darkness a baby girl. Dr M Wainetti 13

14 Example 2 - Promoting Access to Financial Services PNG Microfinance Ltd Savings and credit form basic pre-requisites requisites of modern economy. Majority of population have no access to banking and financial services. 24 December 2004 secured license as a Commercial Microfinance Company and opened first branch mid January Now 6 branches, plus another to open next month. Services & Products: Passbooks, school fee savings, business start up loans, project loans, and consumer credit. Methodology Outreach programs including training and advisory service. IDs provided. Visits to settlements and schools. With internet, can increase out-reach into rural communities. 14

15 Promoting Access to Financial Services PNG Microfinance Ltd 2 As end April 2006, 51,578 deposits with savings value of US$ 3.7 m, and 3,890 loans valued at US$ 1.6 m. Interest rate for loans approx 28% p.a. (major banks charge approx 15-17% 17% p.a) Partners PNGSDP (34%), BSP (24%), IFC (19%), EIB (19%) and Basix (4%) Agent of PNGSDP - Agricultural credit facilities. Provide financial services for rural workers teachers, health workers and public servants, and to landowner communities for royalty and compensation payments. No client is asking to be given a hand-out.. Costs are higher than commercial banks. They are prepared to pay. They just want to be treated fairly, with respect and the same opportunity that we demand. Vision: million depositors and a branch in all provinces of PNG. (Note second largest commercial bank in Cambodia began as a microfinance institution). 15

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31 PNGSDP Governance Singapore Company subject to international standards. Board 3 BHPB appointees, 3 PNG institution appointees Bank of PNG, PNGCC, and Minister for Treasury; and 1 Singapore director. Annual Report Meetings by the Board to PNG Stakeholders in Port Moresby. Since 2005, Board has also undertake public stakeholder meetings in each of the 3 districts of Western Province. Purpose of Meetings to present report and consult on program initiatives. First institution in PNG to undertake such public reporting. Funds are subject to low risk investment rules and fully accounted for and publicly reported. 31

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34 Conclusion Early to say we have succeeded. PNGSDP case study highlights several points Need for sound governance structures Appointment of credible persons with both PNG and international experience Delivery of development programs through Community organisations, especially church agencies and NGOs business model in partnership with business enterprises and through business Major resource companies and shareholders need to embrace sustainable development as core business objective and not as a public relations function. Business, Capitalism and Development involving communities as equal participants is possible. Need to re-examine examine current international aid delivery. 34

35 Wawoi Falls, Western Province Thank you 35