Indonesia sees PNG as a top ‘non-traditional’ market priority for APEC

President Joko Widodo … Madang keen on taking advantage of Indonesia’s trade interest in PNG. Image: TodayOnline

Pacific Media Centre Newsdesk

Papua New Guinea has been placed as one of Indonesia’s top non-traditional market priorities as the country leader President Joko Widodo prepares for his visit Port Moresby next month for the Asia Pacific Economic Cooperation (APEC) leaders summit, reports the PNG Post-Courier.

President Widodo addressed the 33rd Trade Expo Indonesia (TEI), the largest annual tradeshow in Indonesia, last week where he talked about reaching out to Indonesia’s non traditional markets, of which PNG now tops their agenda.

Madang Governor Peter Yama and his entourage had a session with Indonesia’s Chamber of Commerce and Trade team led by president and chairman Bernardino M Vega Jr.

Madang provincial administrator John Bivi gave a presentation on Madang’s investment proposal to Indonesia identifying where they needed attention most.

Bernardino said one of the major agendas when they attend APEC in Port Moresby on November 17-18 will be to look at investment opportunities in PNG, singling out Madang.

Print Friendly, PDF & Email

Article by AsiaPacificReport.nz

MIL OSI – Source: Evening Report Arts and Media

PNG government faces mounting pressure over Maseratis splurge

One of the 40 Maseratis imported by Papua New Guinea for APEC 2018 … threatened two-day strike looms. Image: EMTV News

By Johnny Blades of RNZ Pacific

Papua New Guinea’s government is under mounting pressure to account for a purchase of 40 luxury vehicles for next month’s Asia Pacific Economic Cooperation (APEC) summit in the capital of Port Moresby.

Shipments of the Maserati sedans from Italy arrived in Port Moresby last week, to be used for ferrying around APEC leaders and other dignitaries at the summit on November 17-18.

APEC Minister Justin Tkatchenko said the Maseratis were “being committed to be paid for by the private sector” where demand was so keen they would sell “like hot cakes”.

READ MORE: Facts triumph PNG government spin in Maserati furore

Putting the value of each car at a little over US$100,000 (NZ$150,000), Tkatchenko initially said the Maseratis were being paid for with “no overall cost to the state”.

Amid a public outcry about the Maseratis, the opposition Madang MP Bryan Kramer said the deal could be illegal if the vehicles have been bought by the private sector without any cost to the government.

-Partners-

With PNG’s Public Finance Management Act requiring any state assets to be acquired or disposed of by calling for public tender, Kramer said the government must reveal when the public tender was called.

He has linked the purchase to an invoice for US$6,357,684 to PNG’s government from a Sri Lanka-based auto spare parts and sales company, Ideal Choices.

Since his earlier statement, the minister admitted to Australian media that the government paid a deposit for the purchase. But he has not explained how it would recover its costs after on-selling cars at what is expected to be a depreciated price tag.

Meanwhile, as the jigsaw around the costs of this opaque deal falls into place, the company which transported the cars, Air Bridge Cargo, confirmed its freight planes were chartered by PNG’s government.

Strike looms
Opposition MPs have called for a nationwide strike later this week in protest against the government’s Maserati deal, which has been criticised as being excessively extravagant for a government struggling to fund basic health services.

“While the country faces a polio outbreak, failing health and education systems, systemic corruption, and escalating law and order issues, prime minister (Peter) O’Neill appears to be more concerned about impressing world leaders,” Kramer said in a statement.

“The bottom line is, we cannot afford to be this extravagant. Our country is broke and the O’Neill government continues to be irresponsible and reckless.”

Papua New Guinea APEC Minister Justin Tkatchenko … facing calls to be sacked. Image: Koroi Hawkins/RNZ

Facing calls to sack Tkatchenko and step down himself, O’Neill said yesterday that the vehicles would be sold to the private sector in a public tender.

This would happen in a transparent process, he explained, as soon as the APEC summit concluded in mid-November.

“Like many other international events that we have hosted in the past in the past 40 years, there has always been an arrangement where the private sector will buy those vehicles, so that it saves government money,” the prime minister explained.

Disastrous ‘optics’
But the Maserati deal has made for disastrous “optics”, triggering global media attention and outrage among Papua New Guineans.

“The Italian automobile manufacturer must now come out publicly to explain why they agreed to sell 40 Maseratis destined for PNG APEC to a small dealership based in Colombo, Sir Lanka,” said Kramer.

The outspoken MP said he could not envisage world leaders agreeing to be ferried in luxury vehicles that appear to be procured through a small backyard dealership.

However, Tkatchenko continues to defend the import, saying the kind of service provided through Maserati was standard for APEC summits.

This article is republished under the Pacific Media Centre’s content partnership with Radio New Zealand.

Print Friendly, PDF & Email

Article by AsiaPacificReport.nz

MIL OSI – Source: Evening Report Arts and Media

‘Flight of the myna’ – behind the smiles in post-coup Fiji 30 years on

OPINION: By Sri Krishnamurthi in Suva

When I left Fiji 30 years ago, a week after the first coup in 1987, I planned to write a book titled “The flight of the myna” – a pesky, noisy bird, which can talk if trained and was introduced to Fiji by our forefathers from India.

The book wasn’t to be, but that very thought crossed my mind again as the plane taxied down the runaway to a halt at Suva’s Nausori International Airport.

I had been back to Fiji only once before in 30 years – but very briefly to the West, not Suva, the bustling Capital City.

My first impressions in the night arrival were that houses were lit up everywhere, signalling a population growth – Fiji now has a population of 913,537 (according to the World Population Review website, the official census in 2007 had it at 837,200) and is tipped to surpass the 1 million mark by 2020.

Suva and its surrounding towns of Nasinu, Nausori and Lami has an estimated combined population 330,000 – small wonder then of population growth, which can lead to problems akin to New Zealand.

Homelessness, poverty and housing shortages are today’s reality for the government that will take office after this year’s general election, the second since the 2006 coup.

-Partners-

At the same time, there it was — McDonald’s — with its golden arches, seemingly as busy as the restaurant in downtown Auckland, and Damodar City Centre, a mall like any other, owned by the same family that was heavily invested in movies and movie houses from 30 years ago.

A mall and McD’s signified some wealth, and there is little doubt that Fiji has its fair share of the wealthy, combined with the traffic, just as bad as Auckland’s.

Bustling city
In many respects, Suva remains the same bustling city with the same charming smile and a friendly “bula”, regardless of opportunistic crime, with the “street boys” sometimes targeting unwary visitors and inebriated revelers.

As an academic said: “We have car sales as a big business, because people can hop into their cars and drive to malls.”

Three decades ago you drove, walked or caught on open-air rattler of a bus to “town”.

Malls? What were they?

As for cellphones – they have them everywhere and anywhere, creating the same social problems of any major city – killing conversation and dialogue.

However, the question remains – where is the investment and money coming from?

“Fiji now owes over $500 million to China which amounts to be about 40 percent of all our external debt,” suggests economist Professor Biman Prasad of the National Federation Party.

However, Fiji’s Economy Minister Aiyaz Sayed-Khaiyum wasn’t as concerned and earlier this year said the World Bank had done a thorough analysis of the national debt and was convinced that it was manageable. Loans are used to strengthen infrastructure and stimulate the economy.

China concerns
China’s “One Belt, One Road” policy is cause for concern long term, and its growing influence in Fiji is alarming for some. Not just Fiji, but for the whole Pacific.

Other investments, anecdotally, come from the myriad of people, about 200,000 who left Fiji after the coups – returning, because they can get their citizenship reinstated.

They are coming home as business entrepreneurs and investors and that is very noticeable in the popular drinking holes.

While the smiles are genuine, there is always a feeling of a cloud hovering around, and it’s just not the media decrees that are doing it.

Every person of note and authority seems to be walking around with a well-thumbed copy of the 2013 Constitution in their back pockets.

The dog-eared constitutions. Some with post-it notes, are ready to be pulled out at will, citing chapter and section – much akin to the holy books.

Regardless of the bustling nature of Suva, famous iTaukei smiles and being readily approachable, with their laid-back style of Fiji time, where appointments are seldom kept on the dot – paradise is troubled.

Shoulder looks
You always get the feeling of someone looking over shoulder, muted closed discussions in hushed tones of politics in Fiji – as the Second World War saying goes: “Walls have ears”.

But to get into conversation about politics is a revelation: most people have a view, many of them intelligent, and a surprise to the ears of a supposed-leprechaun who has been away for 30 years.

As a frustrated lawyer at the iconic Holiday Inn said: “Do we want good roads or do we want free speech?” Or the doctor who beamed and said: “There are issues around land.”

However, Fiji is between the devil and the deep blue sea, for a country that is weary and yearns for the stability of the past. It can stay with current FijiFirst government (which gained 60 percent of the vote in 2014) or venture into the unknown. The election, just weeks away, will reveal which direction the voters choose to go.

So, as the old motto from the old Fiji Visitors Bureaus used to say, “Fiji, the way the world should be”.

Exactly, the view of myna bird.

Sri Krishnamurthi is a journalist and Postgraduate Diploma in Communication Studies student at Auckland University of Technology. He is attached to The University of the South Pacific’s Journalism Programme, filing for USP’s Wansolwara News and the AUT Pacific Media Centre’s Asia Pacific Report.

First-year journalism and politics student Dhruvkaran Nand (left) talks to Sri Krishnamurthi about the impending 2018 Fiji general election. Image: Wansolwara Staff

Print Friendly, PDF & Email

Article by AsiaPacificReport.nz

MIL OSI – Source: Evening Report Arts and Media

Torokina – a cryptocurrency with a dream to ‘rescue’ Papua New Guinea

Cryptocurrencies are a controversial phenomenon that have risen from a technical experiment, with zero monetary value, to an industry with a combined market capitalisation of US$225 billion – after shedding more than $30 billion this week. Their future is uncertain, with analysts ranging from enthusiasts to sceptics, but James Halpin of Asia Pacific Journalism profiles a bold scheme for Papua New Guinea.

Cryptocurrencies give developing nations the ability to bring payment systems to people in remote locations, bypassing commercial banks. Torokina, a cryptocurrency in development out of Papua New Guinea, will do just that, says creator David Eri.

Eri, an employee at Oilsearch Limited, is in the process of securing funding to launch Torokina.

After attending the Kumul Game Changers incubator, which brought together startups from Papua New Guinea, Fiji, Tonga and Samoa, and learning how to start a start-up with little to no capital, Eri was selected out of that cohort.

Sponsored by Oilsearch Limited to attend Draper University through its Citizen Development Programme, which aims to give high-performing Papua New Guinean citizens pathways into leadership roles within the company, Eri was able to present Torokina to Silicon Valley entrepreneurs.

He says he received positive feedback.

“I got excellent feedback and have a ways to proceed so I have been working on my project since then,” he says.

-Partners-

Now back in Papua New Guinea, Eri faces the daunting challenge of getting his dream off the ground.

Kina weakness
One of the big issues Eri wants to solve is the weakness in the kina’s value overseas.

“When Papua New Guineans take K1000 overseas they usually get US$250 or A$350. Our kina loses 75 percent of its value as soon as it leaves our shores.”

One way to ensure the stability and attractiveness of Torokina is to take advantage of Papua New Guinean’s natural endowment and peg Torokina to the price of gold.

“One thing we are abundantly blessed with is our natural resources, particularly gold. PNG accounts for 0.7 percent of the world’s gold. Relatively minor but this adds up to US$2.1 billion extracted a year,” he says.

“The aim of Torokina was to combine our natural resources and combine it with current technology to create a gold backed cryptocurrency that performs on par with major currencies like the USD, AUD, JPY, GBP etc in trade and commerce.

“And by pegging the cryptocurrency with a valuable commodity hedges the volatility of the cryptomarket.”

A gold-backed cryptocurrency would work by x amount of the cyrptocurrency representing one unit of gold. If the cryptocurrency increases in price, then more currency is needed to buy the same amount of gold. If the cryptocurrency doesn’t increase in value, then it is unlikely to go below the price of gold.

Gold buying reserves
However, backing the cryptocurrency to gold does force Torokina into actually having to buy or have reserves to buy the gold, forcing purchasers to put their faith in Torokina’s ability to be able to survive a run on selling Torokina.

Gold-backed cryptocurrency has precedents though, and has been done before with the cryptocurrency E-gold emerging as the forerunner in 1995.

Remittances are a minor part of PNG’s GDP at just under US$3million, according to the World Bank. One reason for this is the 10 percent fee that the government takes from remittances.

Using blockchain technology, Torokina would be able to remove the fee barrier for Papua New Guinean nationals sending money back to PNG. This would also remove the remittance firm’s cut and increase income received by families in PNG, of which 75 percent live on subsistence.

Cryptocurrencies give criminals another avenue with which they can move money. However, because of the blockchain they are completely anonymous.

Eri recognises this negative view of a cryptocurrency in a developing country that is prone to money laundering.

Cryptocurrency dangers
A 2014 US Department of Homeland Security report outlined the dangers of cryptocurrencies.

“Cryptocurrencies offer cyber-criminals, corrupt officials, transnational criminal organisations, and foreign terrorist organisations the ability to conduct pseudonymous financial transactions outside of traditional banking channels.”

The report adds that cryptocurrency can be used for “laundering money, fraudulently investing, and buying prohibited goods and services on the Deep Web”.

Torokina’s way of solving this issue would be to have large scale buyers being forced into signing up onto a secure database. While this would limit large scale crime, small transactions would still go unnoticed.

Bank of PNG cautious
The Central Bank of Papua New Guinea is cautious about cryptocurrencies and recently released an advertisement to warn people of investing in them.

Authorised by the Governor, Loi M. Bakani, the advertisement states that cryptocurrencies do not hold any legal standing as they are not regulated by the bank.

The Central Bank has also been looking into blockchain as a technology platform. At a  conference in 2017 it was announced the central bank was setting up a PNG Digital Commerce and Cryptocurrency Association.

“This will allow PNG to join the global blockchain forum… there is no reason why PNG can’t be a leader for emerging markets,” Bakani said.

Currently 85 percent of Papua New Guineans live outside the conventional banking system, being able to access cryptocurrencies and blockchain technology would allow remote Papua New Guineans to catapult over having to deal with commercial banks.

Without having to pay fees for commercial banks, remote Papua New Guineans would be more willing to keep their savings as currency rather than as material items, building wealth.

Eri recognises these hurdles to solve before the launch of Torokina.

“It’s an idealistic dream but one I intend on seeing through,” he says.

“Whether it succeeds or fails will be dependent on factors I have looked at and hopefully took into careful consideration and mitigating the risks as best I can.”

James Halpin is a student journalist on the Postgraduate Diploma in Communication Studies (journalism) reporting on the Asia-Pacific Journalism course at AUT University.

Print Friendly, PDF & Email

Article by AsiaPacificReport.nz

MIL OSI – Source: Evening Report Arts and Media

Freeport’s $3.8b divestment mine deal – what it actually means

By Stefanno Reinard Sulaiman in Jakarta

Four Indonesian ministers gathered to witness the signing of an agreement between state-owned mining holding group PT Indonesia Asahan Aluminium (Inalum) and Freeport-McMoran (FCX) to take over Papua’s PT Freeport Indonesia (PTFI) in complex deals worth $3.85 billion.

Under the agreement, Indonesia will take control of 51 percent of Freeport Indonesia’s equity, and hold a majority stake in the company that operates the world’s largest gold mine, Grasberg in Papua.

The signing was the culmination of years of negotiations, preceding the current administration of President Joko “Jokowi” Widodo, and a tug-of-war between Indonesia and the American company.

The presence of four ministers at the signing was an indication of the economic and political importance of the deal to the Jokowi administration. But it is not yet a done deal, as officials have liked to claim.

The agreement requires the two parties to conduct further negotiations to finalise the details of the divestment. The government expects to finish ironing out the details sometime in August.

Freeport’s footprint in Indonesia
Here is your guide to understanding the seemingly never-ending negotiations, and why it matters for Indonesia to cement the deal as soon as possible:

  • Freeport-McMoran has operated in Indonesia since it signed its first contract in 1967 in a deal that was good for 30 years. In 1997, it received an extension for its operation until 2021. The two contracts in essence covered mining for copper, with gold and silver treated as associated resources found alongside copper ores.
  • Both contracts were signed during the regime of president Suharto. The first contract in 1967 was widely hailed as a landmark moment, symbolising the ushering in of Indonesia’s open-door policy to foreign investment under the pro-Western General Suharto, who had just taken over power from the socialist-leaning Sukarno a year earlier.
  • Developing the mines deep in the mountainous jungles of Papua required huge initial investment to build core infrastructure, including roads, housing and power plants, as well as preparing the pool of workers. In return for this investment, Freeport received generous tax breaks.

-Partners-

Freeport’s first phase of operations exploited the Ertsberg Mountain in Mimika regency. Once the mountain was flattened, Freeport turned to mining the adjacent Mt Grasberg, which turned out to contain even larger reserves. Freeport is looking to mine the large gold reserves underground, assuming the latest agreement holds.

Bloomberg Intelligence estimates that the reserves at the world’s biggest gold deposit and second-largest copper mine are worth about $14 billion.

Freeport-MacMoran’s operations in Indonesia accounted for 47 percent of its operating income in 2017, according to Bloomberg.

Freeport’s huge profits have been a source of contention with long-standing criticism that the tax and royalty revenues paid to the Indonesian government represent only a pittance of its true income.

Indonesia’s 9.36 percent stake in PTFI, as stipulated in the 1991 contract of work (CoW), also does not amount to much, particularly as Freeport has at times withheld paying dividends.

For example, PTFI paid Rp 1.4 trillion in dividends in 2017 after three years of failing to make any payments, according to the Finance Ministry.

Freeport has also attracted controversy for the environmental and social impacts of its operations in the heart of Papua.

Last year, the Supreme Audit Agency (BPK) came out with a damning report claiming that Freeport had caused $13 billion in environmental damages.

Wind of change for Freeport
In 2009, Indonesia passed the Coal and Mineral Mining Law, or Law No. 4/2009. The law requires all foreign mining companies to divest 51 percent of their shares to the Indonesian government, state-owned or regional-owned enterprises or private Indonesian companies within 10 years of the start of operation.

Freeport has managed to work its way around the regulation by indicating that it is operating under a CoW, which is good until 2021.

In January 2017, the government issued a new regulation requiring all mining contracting companies to switch to special mining permits (IUPK) in order to export products in the form of concentrates, which is one step above ore but still not refined.

Freeport refused to fully comply, arguing that the IUPK was not a nailed-down scheme because the stipulations, including the taxation scheme, could change according to changes in government regulations.

In February 2017, the Energy and Mineral Resources Ministry issued PTFI an IUPK saying the company had finally agreed to the terms, paving the way for the divestment deal signed on Thursday.

Series of agreements
In August 2017, following pressure from the government to divest its shares in PTFI, Freeport-McMoran’s top management agreed to increase Indonesia’s share in PTFI to 51 percent, as well as to develop a smelter and increase Indonesia’s revenue from PTFI’s tax and royalty payments.

The Indonesian government chose state mining holding company Inalum to become the majority shareholder in PTFI.

However, questions remain regarding the price tag and how Inalum will pay for its stake in Freeport. Inalum president director Budi Gunadi Sadikin said on Thursday that the company would have to pay $3.85 billion in August and that it had already secured loans from 11 banks.

What are the benefits of majority ownership in Freeport?

Bisman Bakhtiar, the executive director of the Center for Energy and Mining Law (Pushep), said it was time for Indonesia to take control over the huge gold reserves in Papua, as 50 years had passed since PTFI began operations.

“Too much of our resources have been exploited. Surely after 50 years, we have the capability to operate it ourselves,” Bisman said.

Indonesia will reap the largest share of the profits and dividends, which in the past had almost entirely gone to PTFI. The government will also continue to enjoy taxes, royalties as well as a cut of the revenue.

“There are many ways to maximise the benefits from PTFI for the people, and divestment is one of them,” he said.

However, Bisman urged the government to ensure that Indonesia benefited from the next phase of negotiations to finalise the divestment deal.

“Even though we will finally become the majority owner in August, we need to look at the tax, royalty and revenue sharing arrangements. Are they better or not?”

Stefanno Reinard Sulaiman is a journalist with The Jakarta Post.

Print Friendly, PDF & Email

Article by AsiaPacificReport.nz

MIL OSI – Source: Evening Report Arts and Media