MEDIA STATEMENT
I am issuing this statement to highlight the significant negative impacts of state equity in resource projects on Papua New Guinea and to recommend urgent reforms to the fiscal regimes governing the extractive sector. It is imperative to address these issues to ensure sustainable and equitable development for our nation.
State equity in resource projects undermines the role of the state as a regulator, compromising its ability to enforce regulations effectively and impartially. This conflict of interest can lead to regulatory lapses, weakening oversight mechanisms and jeopardizing the interests of our people and environment.
Furthermore, the practice of granting tax and regulatory concessions as part of state equity deals results in minimized tax and non-tax revenues for the government, including causing foreign exchange supply constraints and depreciation of Kina. These concessions also lead to reduced royalties being paid to customary landowners and subnational governments, depriving them of their rightful share of the project’s benefits. This not only exacerbates economic disparities but also undermines social cohesion and community well-being.
Moreover, the cash flow delay in receiving dividends from state equity investments poses a significant disadvantage. Unlike taxes and royalties that are payable monthly and promptly, dividends are subject to the Companies Act requirements, causing delays in revenue distribution and hindering the timely allocation of resources for essential public services and infrastructure development
Dividends to the state could also be minimised through transfer pricing by the foreign operating partners in the resource projects.
In light of these critical issues, I strongly recommend a comprehensive reform of the fiscal regimes governing the extractive sector in Papua New Guinea. The reform should aim to enhance transparency, accountability, and revenue collection mechanisms while ensuring equitable benefit sharing for all stakeholders, including customary landowners and subnational governments.
By implementing these reforms, we can create a more sustainable and inclusive framework for managing our natural resources, fostering economic growth, and improving the well-being of our people. Government (i.e., political) leadership in championing these reforms is crucial for the future prosperity of Papua New Guinea.
I write this as a subject matter expert who has audited all the major resources projects in PNG. I have also audited resource projects in Australia and the Ivory Coast in West Africa. I’m a former Partner of Ernst & Young, former Senior Manager – Assurance & Business Advisory Services at PwC. Currently, I am Principal of Gore Accountants, Managing Partner of Gore Consulting and Executive Chairman of Logohu Capital that provides fund management, investment advisory, corporate finance advisory, financial planning, financial accounting advisory, and dealing in securities service. I’m also the chief advocate of MSMEs as the Founder of the MSME Council, pushing for inclusive economic growth that results in the economic empowerment of Papua New Guineans.
If the Marape-Rosso Government does not take my advice and engage me, the Alternate Government could consider it.
Thank you, Papua New Guinea, for your attention to this matter. I look forward to your support and commitment to compel the government to drive meaningful change in our extractive sector.
James P. Gore. CPA
Advocate for Visionary, Strategic, and Transformational Leadership
