Peter O’Neill, Prime Minister, Papua New Guinea: Interview

Interview: Peter O’Neill

In 2015 Papua New Guinea will celebrate 40 years of independence. How has the country changed during this period of time? Is it better off?

PETER O’NEILL: Forty years is a relatively short period of time for any nation to assess its own achievements, but I think that PNG has come a long way. Let us not forget that up until the 1930s, the majority of our people had no contact with the outside world. From being a very traditional society with tribal obligations, customs and practices, we were rapidly catapulted into modernity.

Today PNG is emerging as a nation with a sense of purpose and direction, and our citizens are experiencing a renewed hope for the future, perhaps for the first time since independence. Papua New Guineans are in fact fully a part of the global community, and their desires are the same as anybody else’s in the world. This puts additional pressure on our administration to deliver on these expectations, but we are confident that we are moving in the right direction. Despite our cultural differences, coming together as a nation has been our prerogative. Introducing universal education and health care, for example, sends a clear message about the government’s commitment to strengthening the physical and moral foundations of our country, as does rebuilding some of the infrastructures that have been in decline for so many years now.

PNG expects to reach double-digit GDP growth in 2015, but may not meet its millennium development goals. Does this reflect an unbalanced economy?

O’NEILL: We often talked of 2015 as a defining year for PNG, despite some strong headwinds from the global economy, as the revenues from the liquefied natural gas (LNG) project start trickling into the system. We will have the chance to address some of the most pressing issues for our socio-economic development, including better distribution of wealth.

In the past we have missed out on these opportunities, mainly because of mismanagement, but if we concentrate on core policy areas such as free education and universal health care; stronger law and order; and better infrastructure, we have a good chance of reaching some of these millennium development goals, and perhaps even of exceeding them.

Having said that, and I have been very clear with the UN on this point, we will need at least five or six years to achieve these goals, as the country is playing catchup because of the mismanagements of the past. It is not about avoiding these issues, but being realistic on what we can deliver at the moment.

With its sheer size and abundance of natural resources, do you think PNG could play a more prominent role within the region?

O’NEILL: Our development agenda is very much linked to the Asia-Pacific region, and when you look at some of the countries around us, with populations that often do not reach 10,000 people, it seems natural that we take a more prominent role, especially within Melanesia. By providing energy and food security, PNG can turn into the engine of regional economic growth and we do feel this sense of responsibility.

For this reason we continue to assist the development agenda of some of the smaller island nations and support democratic transitions in others, as was the case in Fiji, but also in Vanuatu and the Solomon Islands. In this time of great economic uncertainty we must pull together as a regional block if we want to stay competitive globally, and the institutions expanding their reach within the region are a testament to that. Energy prices have declined significantly in recent months and we are feeling some pain, but we remain fully committed to our obligations as a regional leader.

To what extent has the success of the LNG project – marking its first full year in 2015 – spearheaded new developments within the oil and gas industry?

O’NEILL: The commissioning of the first LNG plant has been an outstanding success for PNG, no question about it, especially considering the difficult terrain and landownership issues that had to be solved along the way. The project was delivered ahead of time and pretty much on budget and it conveys a message that PNG is capable of handling a world-class investment, perhaps with even greater advantages than other markets.

Following that early success there are now some very exciting new developments, like the Total-InterOil joint venture to develop the Elk-Antelope gas field. This project is even larger on paper than the first PNG LNG project and could provide the basis for a thriving petrochemical industry in the future as the country diversifies its economic base in the attempt to create new jobs for Papua New Guineans. We must ensure that the development of our resources is followed by value- added downstream processing.

Our priority at the moment is to support the continuing exploration and drilling programme of ExxonMobil and its partners, which should soon provide enough gas for an additional third train to be built within existing facilities. We have always stated that domestic market obligation is a priority for our country and while ExxonMobil has already started providing enough gas for power generation, we would like to extend the agreement to any future trains being built in PNG.

Do you expect the mining industry to pick up again in the near future, considering that it still provides the country’s largest export earnings?

O’NEILL: It is true that mining has seen better days in PNG, but there have been a lot of activities behind the scenes that have not received the media attention they deserve. For example, we have been working fairly closely with the developers of some of the country’s prospects, like those in Wafi-Golpu and the Frieda River, and we are encouraged by their advanced structural development programme. The extension of the Ok Tedi mine’s life and the discovery of grade one ore there is also good news, considering the impact that the mine continues to have on the Western Province. At the moment we are in the process of consolidating all of our mining interests into a single structure called Kumul Mining, and the aim of the government is to build a world-class team to manage these strategic assets, without falling into the patterns of the inefficient government organisations we have seen in the past.

Productivity remains a real challenge for PNG and that applies to the mining industry as well. The idea is to maximise the return of the shareholders and we are learning from countries like Singapore and Malaysia, who were able to build multibillion-dollar organisations out of nothing. We have all the resources to achieve that: the only thing we are lacking is good management. I think the industry has a bright future and the time to invest is now, precisely because we are at the lower end of commodity prices. Going back into construction when the industry is picking up again would be a serious mistake, as far as I am concerned.

Should the market expect a significant privatisation effort from the government then, as it recognises the limited reach of state-owned companies?

O’NEILL: We are currently working on a structured privatisation of state-owned assets and the first company on the list will be Air Niugini, one of the few airlines in the world that has remained profitable despite a very depressed aviation industry globally. The company’s safety record is impeccable and should provide a good platform when an initial public offering is launched before the end of 2015. There is enough liquidity and good mobilisation of savings in PNG to attract a significant amount of domestic capital, but we can also look at attracting foreign investors further down the line.

An efficient airline also bodes well for the growth of the domestic tourism industry. In looking to attract as many as 200,000 touristic visitors within the next two years, having a regional airline that can compete among its peers would be a great asset. But Air Niugini is only the first of a series of state-owned enterprises that will be privatised in the near future. This government is seriously determined to reform PNG’s public service.