|Subject: ‘Treasury, BPNG should negotiate loan, not IPBC’
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Date Posted: Thu, Oct 30 2008, 10:12:59pm
The people of Papua New Guinea, in enirety and in totality, demand that the Somare-Puka Government should withdraw all these enacted powers vested to IPBC to negotiate the financing arrangement and also demand that Arthur Somare should resign as the minister in-charge.[The politicians especially in the Enga and Southern Highlands Province should mobilize themsleves and the peoples' support to demand that the Somare-Puka Government withdraw these powers from the IPBC.]
The Department of Treasury, aided by the Bank of Papua New Guinea, should be the negotiator, as traditionally tasked, to conlidate the financing arrangement.
This would be the BIGGEST MISTAKE the Somare-Puka Government would ever make that would affect about more than five generations of Papua New Guinea.
The Pepole's Power has to return now and be demonstrated as the Ultimate Power over the power of the Government of the day.
Read the The National; Thursday, 30 October 2008
‘Treasury, BPNG should negotiate loan, not IPBC’
By JASON SOM KAUT
LEADER of Opposition Sir Mekere Morauta says any external commercial borrowings to pay for the State’s 19.4% equity in the PNG LNG project should not be led by the Independent Public Business Corporation (IPBC).
Instead, the Department of Treasury and the Bank of Papua New Guinea should take the lead because they have the expertise, official contacts and knowledge of the international market to ensure the State’s borrowings were on fair terms.
“The State is the owner of public debt and is responsible for its repayment, whether it is debt for Telikom, PNG Ports, Air Niugini, University of PNG, Department of Health, Agriculture or IPBC.
“Any borrowings by any State organisation are public debt, and the Government is responsible for their repayment,” Sir Mekere said.
He described State Enterprise Minister Arthur Somare’s claim, as reported in The National on Oct 28 that funds would be raised without adding to Government debt, as “sheer nonsense” and reflected a lack of understanding of public finance.
Sir Mekere said borrowing for the State was the responsibility of the Treasury Department, with the Central Bank playing an oversight role.
“BPNG must have the role of monitoring the terms negotiated – interest rate, maturity, and fee structure – to ensure they reflect current international conditions and protect the nation’s interest,” he said.
Sir Mekere said previously, Cabinet ministers and senior officials of Government departments were never allowed to negotiate State loans.
He urged Prime Minister Sir Michael Somare to put a stop to the practice.
“Perhaps Minister (Arthur) Somare is suggesting (wrongly) that because he is negotiating a securitised loan, where State guarantees are not involved, that it is not Government debt,” Sir Mekere said.
“Does he not realise that whatever securities he is offering belong to the people of PNG and that they will be at risk?” he asked.
Sir Mekere called on Sir Michael to withdraw the so-called mandate given to IPBC to source funding for the State equity in the LNG project and give the role back to Treasury where it rightly belongs.
When contacted for his response, Minister Somare said IPBC also had many qualified staff, and it had a good balance sheet that enabled it to hire people with the skills it needed.
He said the IPBC was working well and making inroads in partnerships with other line agencies as it was an integral part of Government.
Mr Somare said the IPBC’s financing option would not add to the Government debt, but he did not elaborate, saying he was not at liberty to reveal details as the discussions were still ongoing.
But he did say the option met all of the Government’s criteria including not selling down the State’s 19.4% equity, not pre-committing proceeds from equity and not putting pressure on future Government budgets.
Mr Somare said the IPBC had a strong balance sheet of K7 billion to negotiate with.
IPBC met all requirements, says official
THE Independent Public Business Corporation was chosen over Petromin Holdings as the State’s nominee in the PNG liquefied natural gas (LNG) project because it met all necessary Government requirements and had a better balance sheet, a well-placed Government official said yesterday.
The official, who did not wish to be identified, was responding to comments from various quarters including Opposition leader Sir Mekere Morauta regarding the choice of nominee and questions of why the IPBC was sourcing massive funding from the Government instead of the task being left to the Department of Treasury with oversight from the Central Bank.
The official denied allegations that IPBC would issue exchangeable bonds to secure A$1.68 billion (K2.85 billion) as the State’s equity in the LNG project by using the Government’s 17.6% stake in Oil Search Limited as security.
He said contrary to what critics were saying, the IPBC was not a family business and the transaction was not a loan but a purely commercial transaction.
The official said IPBC was using the Open Book Economic Model, approved by Treasury, as the tool to negotiate the gas agreement.
IPBC’s balance sheet currently stands around the K7 billion mark.
The source clarified that IPBC, as holder of all State entities, had a large pool of experienced and qualified people and, where it did not, it had the money to procure the expertise it needed.
The announcement of IPBC as State nominee was made last Friday by Prime Minister Sir Michael Somare after a final five-hour deliberation over available options from Treasury and the IPBC.
Sir Michael said the appointment of IPBC would ensure the Government did not go into debt to finance its equity and not need to provide any State guarantees.
The Government’s selection criteria for requirements to secure funding were:
*No-sell down of the State’s 19.4% equity in the project;
*No pre-commitment of proceeds from equity;
*No more adding to the debt stock of currently K6 billion;
*No State guarantees;
*No conditions from large multi-national lenders; and
*No pressure on any Government budgets.
The source said IPBC was the only one to have met all these requirements.
State Enterprises Minister Arthur Somare, when commenting on the nomination of IPBC earlier this week, said: “The raising of the Government share of equity brings certainty and credibility to the project.”
According to Treasury secretary Simon Tosali’s assessment of the exchangeable bonds, “it indicates the bonds will give the holder (a Middle East organisation) the right to acquire the State’s 17.6% shares in oil shares”.
Petromin Holdings refused to comment on the issue.
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