OBG talks to Wasantha Kumarasiri, Managing Director, Independent Public Business Corporation (IPBC)

Interview: Wasantha Kumarasiri

What will be the IPBC’s position within the restructuring of state-owned assets in Papua New Guinea through the Kumul corporatisations?

WASANTHA KUMARASIRI: Whereas mining and petroleum assets will go under the respective Kumul trusts, the other state-owned assets – such as PNG Power, PNG Ports and Air Niugini – will come under the IPBC, which will change its name to Kumul Consolidated Holdings. This transition needs further refinement and won’t be implemented before June 2015, but the idea is to eliminate conflicting negotiations between state entities and provide the best outcome for the country. Under the new structure, the IPBC will also take on additional functions. Currently it has the responsibilities without the necessary authority, whereas the holding company-subsidiary relationship will provide the legal framework needed for the IPBC to do its job more exactly.

In light of the restructuring, how would you respond to the assertion that state-owned enterprises (SOEs) act as a drag on economic growth in PNG?

KUMARASIRI: There was a recent study by the Asian Development Bank showing that the multiplier effects of investments by PNG SOEs are the lowest in the region. However, the study looked at the ten-year period between 2001 and 2011 and gave results in a lump sum figure, which does not accurately reflect the situation. Over the last five years, some SOEs have exceeded their industry benchmarks – which is why a new report that takes this into account will be released in the last quarter of 2014. Each SOE has performance issues to address, and boards and shareholders must take the proper measures. These dynamics will change once the Kumul corporatisations are complete.

What strategic projects is the IPBC currently implementing in key sectors of the economy?

KUMARASIRI: Top sectors on our agenda, given their immediate impact on the economy, are power, IT and transport – specifically ports. The relocation of the Port Moresby port to Motukea Island by 2017 and the expansion of Lae Port, which includes the construction of the Lae tidal basin, are expected to reduce trade costs. At the moment, neither port can receive large vessels, hence requiring re-handling and extra transport. These additional costs inevitably affect the country’s import and export sector, and increase prices for consumers at the end of the supply chain. The longterm strategy is to turn PNG into a shipping hub for the Pacific, as it could absorb a lot of the region’s traffic, especially from neighbouring island countries. Increasing vessel arrivals would also generate jobs for both skilled and unskilled labour.

As for power generation, reducing the cost of electricity would encourage and boost PNG’s manufacturing capacity – especially for canneries, as the country continues to be one of the world’s premier producers of tuna. At the moment, one KWh costs $0.31 in PNG, compared to only $0.21 in Singapore. In countries like Indonesia, where power generation is subsidised, it costs as little as $0.07. By increasing the use of gas for power generation, while simultaneously boosting the capacity of hydropower, we are confident that we will be able to bring down the costs of electricity to $0.20/KWh in the future. That, plus the introduction of industrial zones and tax holidays, should change the manufacturing landscape in PNG.

In the telecoms sector, the major issue is how to increase competition and bring down prices, and I feel that the communications regulator should step in to provide guidance. I do not see why, for example, tower-sharing is not mandatory for operators throughout PNG, as it is in many other countries, or why clients cannot freely transfer their mobile number from one operator to another, because phone number portability is one of the greatest facilitators of competition in telecommunications. These are key priorities in my opinion, as they would prevent a single company from controlling as much as 98% of the market, a share that is practically unheard of both in the region and beyond.