Former Opposition leader Don Polye has hailed the government for the decision to sell the 10% shares in the Oil Search Ltd.
He said it is a step in the right direction but more economic recovery work is needed.
“As a citizen and national leader of Papua New Guinea, I feel it is appropriate for me to comment on the recent news report by Reuters regarding the PNG Government’s intention to sell the State’s stake in Oilsearch”, said Polye.
“The US $ 1.3 billion UBS loan taken in 2014 to acquire 149 million shares in Oilsearch was a bad decision in the first place. Although the shares were acquired at AUD $8.20 a piece, there was no business justification available then in 2014 to buy the 10% shares to support such an astronomical loss to the country.
"The oil prices were falling and the business climate developed by the PNGLNG construction phase was declining. Nonetheless what happened, happened”, Polye said.
“Today the country is experiencing recession and certain strategic measures need to be undertaken and one of which is of course the sale of these 10% Oilsearch shares.
This decision will free up the economy of liabilities the K3 billion loan incurred. The Government’s decision to sell these Oilsearch shares although late, is at least a move in the right direction”, he said.
“We are reported of by Reuters that the State’s shares will be sold at a floor price of AUD$6.55 per share. This price is lower than the AUD$8.20 per share initially paid by the PNG Government to acquire the shares. A loss of AUD$245.9 million is immediately recorded at this transaction if it is successful!” he said.
“There will be other hidden costs to this exercise that the country will need to pay for too. If the original loan of AUD$3.0 billion from the Universal Bank of Switzerland (UBS), Australian branch was not fully repaid more default costs will be imposed on the State. If the kina exchange rate continues to spiral downwards, PNG will earn less for the sale”, explained Polye.
“In other words, although the PNG Government’s exit from the 10% stake in Oilsearch is a good decision, costs will still be very high. Therefore the Government needs to execute other vital economic recovery strategies immediately to improve cash-flow and lessen the impact of economic recession being felt by all citizens at present”, stated Polye.
“The best way forward in addition to the sale of the Oilsearch shares is to reform the Public Service, to cut costs and save money. It is paramount that there is micro-economic freeform introduced by the Government immediately to save costs and improve state owned businesses’ profitability.
"Also, immediately identify essential services that the Government needs to properly fund for sustaining the well-being of all Papua New Guineans. Any capital expenditure should be carefully controlled and spent productively on economically viable sectors, especially in the non-mining and petroleum areas”, said Polye.
“Finally, I call on the Government to start dialogue with international financial institutions like the World Bank and the International Monetary Fund (IMF) to put in place an economic and cash-flow improvement package.
He said part of the proposal should be to secure World Bank and IMF assistance to bail PNG out of all its national debt liabilities previously incurred.
"The time has come for PNG and its government to dismiss political egos, political rivalries, and political correctness to allow common sense and logical rationale to prevail”, Polye said.