Author: OBG Admin

Chaim Zach-Managing Director and CEO-Agric International Technology and Trade; Kabiru Rabiu-Group Executive Director-BUA Group; and Aliyu Abbati Abdulhameed-Managing Director

The PNG LNG project could have a big impact on the local economy

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With 2015 growth predictions ranging from 6.9% to 21%, Papua New Guinea may end the year as the fastest-growing economy in the world or as simply another fast-growing economy. The country may be able to spend as planned, make the necessary and desired investments and build for a sustainable future, or it may find itself scrambling to maintain its momentum and keep its fiscal situation from deteriorating. Given the direction of commodity prices and the cost of financing, as of early 2015 officials were expecting the possibility of the latter and calling for some major adjustments in spending. “For 2015, economic growth will reflect a

Stuart Tait-Regional Head of Commercial Banking-Asia Pacific

PNG’s budget raises concerns about the state of economy

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On paper, the 2015 budget, delivered in late 2014, was a solid financial plan. It anticipated PGK13.9bn ($5.3bn) in revenues and called for PGK16.2bn ($6.1bn) in expenditures, leading to a high but manageable 4.4% budget deficit. Commentators called it restrained, bringing the deficit down from 7.3% of GDP in 2014 without pulling back too much. The year was seen as a transitional one, in which the government moved from aggressive deficit spending between the construction and production phases of the Papua New Guinea liquefied natural gas (LNG) project to a more sustainable path and an eventual end to deficits. The idea was to keep building

Pham Hong Hai-CEO-HSBC Vietnam

Digging up value: Banks use new methods to attract depositors

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Though the country may appear to lack liquidity, Papua New Guinea may have billions of kina hidden outside the banking system. According to Tony Westaway, managing director of Nationwide Microbank, residents tend to store cash at home, or hide large sums underground in bamboo pipes and in tin cans. The reasons are many: some people do not understand banking, while some do not trust banks and others simply cannot physically reach bank branches, given the topography of PNG and the limits on transportation. However, this situation is fast changing. The banks, have had profits squeezed by central bank policies on exchange rates and lending, and

Xi Jinping-President of China

New legislation for PNG’s sovereign wealth fund to be implemented in mid-2015

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Papua New Guinea established a sovereign wealth fund in 2012, and while the original law was delayed and greatly revised, it is set to be implemented by mid-2015, with the first liquefied natural gas (LNG) proceeds flowing into the fund by 2016. If all goes according to plan, national savings will begin to accumulate and grow offshore. Estimates have placed the total potential value of the sovereign wealth fund at $30bn. BOUND FOR SANTIAGO: Like most sovereign wealth funds, PNG’s is designed to keep money earned from the extractive industries in dedicated pools of highly stable investments, such as government bonds and triple-A-rated securities held

Sheikh Ahmad Duaij Jaber Al Sabah-Chairman-Commercial Bank of Kuwait

Financial inclusiveness a key goal for PNG

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Financial literacy and financial inclusion are becoming pressing issues in Papua New Guinea and receiving increased attention. In part, this is a function of global trends: financial literacy is vital to sustainable development and is actively being supported by the donor community and local governments. It is also especially a focus for PNG, where a combination of topography, geography and history means understanding of money and finance is limited outside the major cities. Opening Doors “Improved financial literacy can increase economic participation and social inclusion, drive competition and market efficiency in the financial services sector, and potentially reduce regulatory intervention,” said Loi Bakani, governor of

Bank South Pacific: Finance

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The Company Bank South Pacific (BSP) is the leading bank of the South Pacific, holding the largest branch network in Papua New Guinea with over 60 branches throughout the country including its operations in Fiji and Solomon Islands. BSP has total assets valued at PGK15.9bn ($6bn), equivalent to around one-third of PNG’s total 2013 GDP estimate. The bank’s customer loan and receivables portfolio grew from PGK1.51bn ($571.4m) to PGK6.8bn ($2.6bn) over 2014. In PNG, BSP’s lending market share increased from 47% to 52% over the same period, while customer deposits grew to PGK12.7bn ($4.8bn), up PGK507.4m ($192m). At year-end 2014, BSP’s deposit market share in

Highlands Pacific: Mining

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The Company Highlands Pacific is a PNG incorporated and registered mining and exploration company listed on the Australian Securities Exchange and on the Port Moresby Stock Exchange. Highlands’ major assets are interests in the producing $2.1bn Ramu nickel cobalt mine and the Frieda River copper-gold project, with exploration in progress in the Star Mountains. Highlands also has an exploration tenement on Normanby Island (Sewa Bay). Highlands has achieved a major turnaround in earnings, reporting a profit of $7.6m for 2014, compared with a prior year loss of $37.2m in 2013. The profit included a $15m impairment reversal for the company’s investment in the Ramu nickel

InterOil: Oil and gas

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The Company InterOil is an independent oil and gas business that is primarily focused on Papua New Guinea. InterOil has exploration licences covering almost 16,000 sq km, with this divided into four petroleum prospecting licences (PPLs) and two petroleum retention licences. Each PPL is currently held for six years, from March 2014. Most of the licences spread over the Eastern Papuan Basin. In the last several years, InterOil has focused on improving its exploration programmes in the hopes of developing a robust oil and energy business. It has made five consecutive discoveries, which include Elk, Antelope, Triceratops, Raptor and Bobcat. InterOil posted a profit of

Éric N’guessan-Managing Partner-EY Côte d’Ivoire

The government focuses on developing PNG’s debt markets

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Although the Port Moresby Stock Exchange ( POMSox) has been capable of offering debt instruments for some time, the debt market is largely undeveloped in Papua New Guinea. The government’s local-currency issues are illiquid, it has not yet issued an international bond and there is currently only one corporate debt instrument on the POMSoX. There is little available beyond primary issue government bills and bonds that must be held to maturity. However, the market is starting to evolve, and it looks set to become more active and more useful to the economy as a whole in the near future. An international sovereign bond is currently

Newcrest Mining: Mining

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The Company Newcrest Mining (NCM) is one of the world’s largest gold mining companies and operates mines in four countries, with a global workforce of around 10,000. NCM’s strategy is to build a portfolio of predominantly long-life, low-cost gold assets that can remain profitable through various stages of the gold price cycle. The company is an unhedged gold producer and seeks to maintain a conservative balance sheet. NCM has a concentrated asset portfolio comprising operating mines and growth opportunities in Australia, Papua New Guinea, Indonesia, Côte d’Ivoire and Fiji. Current reserves estimates include 78m oz of gold and 12m tonnes of copper, which represents over