The Papua New Guinea Government (PNG) will publish the contract details of existing mining and petroleum projects to promote accountability and good governance in the mining and petroleum industry.
This will be executed through the Extractive Industries Transparency Initiative (EITI) Report which begins next year when companies operating mining and petroleum projects in the country will be required to disclose their project contracts for the sake of transparency.
This follows observations from other countries that contract transparency, or the disclosure of project agreements, has had a positive influence in other EITI implementing countries around the globe.
The Head of PNG-EITI National Secretariat, Lucas Alkan, announced that Papua New Guinea will be required to publicly disclose project agreements and contracts by year 2021.
“Disclosure of project agreements has had a positive influence in other EITI countries because it allowed the public to compare different project agreements and this created a level playing field for resource developers, created competition, and enabled governments to negotiate better deals for their resource wealth. Therefore, PNG stands to benefit by doing the same,” he said.
Mr. Alkan pointed out that several key benefits could be derived by the landowners, the government, and citizens for disclosing agreements and these included:
- A better understanding by all parties of the project agreements on the terms on which oil, gas, and mining activities are extracted and sold
- A better understanding of how revenue flows (royalties, dividends, and taxes) to the PNG government, provincial government, local level government, and landowners and communities are affected by extractive operations
- Enabling the government and its citizens to see what subsidies and tax incentives are awarded to industry companies or resource developers
- A better understanding of the obligations that the project developers are required to meet to protect the impacted communities, the environment impacts and make social payments or provide local employment. Being aware of these in the contracts or project agreements enables citizens to ensure that the developer complies with its obligations
Mr. Alkan said that, for resource developers, disclosing the terms of contracts supports open, fact-based dialogue that can help to build trust, reduce conflict and reinforce a company’s social obligation to operate in the country.
“Disclosure of project agreements makes it easier for companies to demonstrate that they are complying with their financial and social obligations and also helps them to address reputational risks.”
He added that for the benefit of the government, the disclosure of contracts incentivises officials to arrange fair contracts and it prevents them from concluding agreements that are disadvantageous to their citizens and the country.
“Contracts and project agreements that are disclosed can be more easily enforced because relevant agencies and departments within the government become more aware of the contract terms and can collaborate more effectively to ensure that contract terms are maintained.
Public disclosure of contracts allows the citizens to understand the interested parties’ roles and responsibilities in a project. It also enables people to see how much money (in the form of taxes, royalties, dividends, etc) will flow from the projects to the relevant government entities, and to hold them to account for their use.”
The EITI official is calling on all responsible government entities involved in the negotiation process to ensure that all new projects now in the pipeline should start making provisions for contract transparency because PNG, as an EITI implementing country, will need to fulfill this requirement. The new resource projects now in the pipeline include the:
Mr. Alkan added that the Government will need to ensure that contract disclosure provisions must be built into the project agreements for the above 6 multi-billion kina projects worth over K130 billion (US$ 31 billion) now in the pipeline to be developed.
The PNG-EITI is housed at the Papua New Guinea Department of Treasury where it coordinates a multi-stakeholder group representing companies, key government departments, and civil society organisations who decide on what is written within the PNG-EITI report that follows the EITI Global Reporting Standard implemented by more than 50 countries around the world.
