THE Benefits Sharing negotiations currently ongoing in Kokopo between Wafi-Golpu landowners, PNG Gov’t and other relevant authorities must cease until we enact laws to control illicit financial flows out of PNG – do not repeat the same mistake as the PNG LNG project.
The biggest and major concern for our country and government is the existence of arrangements that facilitate illicit financial outflows. Until we enact laws to curtail this, we will always be playing a losing game in any negotiations with resource developers.
The laws must be designed to reduce the scale and negative impact of such flows on PNG’s development and governance agenda. By some estimates, illicit flows from PNG could be as much as US $3 billion per annum but this figure – although indicative estimate may well be short of reality as accurate data does not exist for all transactions in PNG.
Immediate and obvious impacts of illicit financial outflows:
• Draining of foreign exchange reserves – currently happening in PNG.
• Reduced tax collection and royalties by Gov’t – based on profit which most companies ring-fence (discuss ring fencing in a latter post).
• Tax avoidance
Such outflows undermines and ridicules PNG’s current rule of law, stifles trade and investment and worsens macroeconomic conditions as these outflows are facilitated by numerous international tax havens such as Bermuda, British Virgin Islands etc. and secrecy jurisdictions that enables the creation and operation of millions of disguised corporations, shell companies, anonymous trust accounts, and fake charitable foundations.
Other techniques used include money laundering and transfer pricing – (discussed in one of my previous post where companies sell products at artificially low prices to trading partners offshore, who sells at market prices – thus making huge profits. The operating company makes less or not profit so doesn’t pay royalties and dividends to the PNG Gov’t as an equity partner).
Therefore the Gov’t must take serious prompt actions to curtail illicit financial outflows from PNG for the benefit of all Papua New Guineans into the future. The Gov’t must adopt laws, regulations and policies to encourage transparent financial transactions.
Moreover, PNG must reach out to the G-20 or the other forums such as the APEC Leader’s Summit in November 2018 to call for greater transparency and tighter oversight of international banks and offshore financial centres that facilitate such flows.
This will be the perfect opportunity to raise this issue to curtail illicit financial outflows. Then when we have enough money in the country then the pie will be big enough to share. Right now we are trying to share a small slice of the pie when the larger slices are taken offshore under highly dubious and cleverly crafted financial arrangements.
Without these laws– we will never see any real tangible benefits from the exploitation of our natural resources. - I hope people read this post and make some sense out if it.