Budget to lure mining investment, says PM
The National, Copyright 2000
December 5, 2000
By BRIAN GOMEZ
SYDNEY: Prime Minister Sir Mekere Morauta told Australian mining industry leaders yesterday his latest budget would reduce the fiscal burden on many projects, creating an environment that should prove attractive to foreign investment.
"We are liberalising very significantly, the allowable deduction regime to improve incentives to explore and to develop new mines," he told the PNG Mining and Investment Conference in Sydney, adding that company tax had been slashed from 50 to 30 per cent.
Sir Mekere noted that the incentive to explore in PNG would also be greatly improved by a decision to increase the loss carry-forward period for taxation purposes from seven years to 20 years.
In addition, the Government's requirement that there is a 50 per cent continuity of ownership has been removed, making it more attractive for companies to sell or buy an asset base with a significant exploration component.
He said: "To be frank, we are not making these changes so that executives and shareholders in mining companies will be happier, although the changes should have that effect.
"We are making the changes because they will lead to more mines, and to more of the resources in established mines being utilised. Mines will last longer, and more economic value will be extracted from them during their lives."
Despite the attendance of a PNG Prime Minister at the conference for the first time in several years, attendance levels at the conference appear to have fallen off somewhat in line with the lower interest in the country's mining sector in the past few years.
Nevertheless a number of people attending the meeting expressed support for the measures that Sir Mekere has undertaken and expressed confidence the measures he outlined would help turnaround PNG's mining sector and the currently bleak exploration scenario.
Sir Mekere explained to the conference some of the measures he has undertaken to help turn around the economy and alluded to the problems of law and order and perceptions that landowners were escalating their demands on mine operators.
"I don't think the reality was nearly as bad as the impression, but impressions do matter. And, of course, the well-publicised environmental problems at Ok Tedi, and the Bougainville crisis, did not help," he said.
While the national budget has been brought under control, Sir Mekere said "perhaps most importantly, we have put in place new institutional arrangements to ensure that the excesses of the past cannot be repeated".
Changes to the policy environment for mining and petroleum were guided by two overall themes, he said.
First, to make PNG competitive once again in the global market for mining and petroleum investment and second, to reassure investors regarding the stability of the policies.
"We see the changes as allowing Papua New Guineans to have their cake and to eat it as well; to get more revenue in the long term by being careful not to take more now than can be taken without deterring production," said Sir Mekere.
The incentive for greater oil exploration was being provided by a reduction in company tax to 45 per cent because fields that have yet to be discovered "are expected to be small".
Sir Mekere said the Government has also decided to stabilise the terms for the US$3.5 billion PNG gas project for a period of 20 years with fiscal stability assurance for 10 years or the duration of the project financing period in the case of mining and oil projects.
"We have worked hard to create the conditions for renewed high levels of investment in the mining and petroleum industries in our country, and I look to you to respond. I am confident that you will," he said.
When there were no questions from the floor, Sir Mekere, in a tone indicating a high level of surprise, said he also had not received a single question during the recent locked door budget briefing in Port Moresby.