Ok Tedi nationalisation not OK, says PNG ex-leader

FORMER PNG leader says the nationalisation of Ok Tedi Mining has increased the perception of sovereign risk.

FORMER Papua New Guinea prime minister and central bank governor Mekere Morauta yesterday warned that last week's nationalisation of Ok Tedi Mining presented dangers for the country by increasing the perception of sovereign risk.

The rapidly introduced legislation cancelled the shares of Ok Tedi's 63 per cent owner, a trust named PNG Sustainable Development Program, and issued new shares to the government, giving it 100 per cent control.

Sir Mekere, the chairman of both Ok Tedi and PNGSDP, said the legislation "would undermine investor confidence at a time when a number of very large investments are on the horizon".

He said the bills "should have been circulated widely and debated fully, not kept secret and bulldozed through in one day".

The nationalisation debate is likely to shift to the courts of Port Moresby and of Singapore, where PNGSDP is domiciled.

The PNG Treasurer, Don Polye, revealed last week that the budgeted fiscal deficit for 2013 of 7.2 per cent of gross domestic product -- following a succession of balanced or near-balanced budgets -- was expected to deteriorate to about 7.7 per cent.

He attributed this in part to falling commodity prices, and in part to large corrupt payments for "ghost workers" -- staff who have died or moved, or collect more than one salary -- on government payrolls.

It remains unclear how the government will pay for the takeover. The share of the mine owned by PNGSDP alone is valued at the equivalent of 55 per cent of this year's originally budgeted deficit.

Sir Mekere also said that "it is wrong to leave it to politicians to decide if compensation is to be paid (for expropriated shares), and the amount".

This will be decided by Prime Minister Peter O'Neill, according to the legislation, acting on cabinet advice.

Sir Mekere said: "Such decisions need to be taken according to clearly defined, established processes with full accountability and transparency."

He said that the Western Province villages in the vicinity of the mine, which signed the Community Mine Continuation Agreement in return for a flow of dividends and other benefits via PNGSDP, "have been tricked by a ruthless Prime Minister focused on his own ambitions".

Sir Mekere said: "Where we can fight, we will fight. Why are we expropriating assets from our own people?"