Unveiling the Imperative for Corporate Governance Consciousness in Papua New Guinea
In an exclusive presentation during the prestigious Masters Pinnacle 2023 event at the University of Papua New Guinea (UPNG), a compelling discourse unfolded on the critical challenges facing Papua New Guinea (PNG) and the pivotal role of Corporate Governance (CG) in reshaping the nation’s moral landscape.
Championing Moral Appeal in a Nation at Crossroads:
The speaker, Mr. Meck Minnala, who is also a dedicated postgrad student at UPNG, skilfully navigated the intricate question of how to make a moral appeal to a nation seemingly adrift from its moral compass. Highlighting CG as not just a set of rules but a moral conscience, the speaker posed questions that resonated with the audience’s collective consciousness.
The presentation skilfully elevated Corporate Governance (CG) beyond a mere set of rules, positioning it as a moral conscience for the nation. This perspective went beyond the conventional understanding, emphasizing CG as a guiding principle deeply embedded in ethical considerations. The speaker’s adept navigation of this complex terrain resonated with the audience, prompting introspection into the collective consciousness of Papua New Guinea (PNG).
Biblical Wisdom Echoes in the Halls of Academia:
The presentation drew inspiration from the biblical passage John 8:32, emphasizing the transformative power of truth. This truth, as articulated, extends beyond individual liberation to the collective emancipation of PNG, shackled by the daunting complexities of corruption and ethical dilemmas.
“You shall know the truth and the only the truth will set your free” (John 8:32)
This biblical passage served as a guiding light, illuminating the transformative power of truth in a nation grappling with the shackles of corruption and ethical dilemmas. This passage reaches beyond individual liberation, resonating with the collective aspirations of Papua New Guinea (PNG). The truth, as gleaned from this ancient wisdom, becomes a beacon of hope for a society yearning for emancipation from the complex web of corruption that has entangled the nation.
As the halls of academia echoed with the resonance of this biblical wisdom, the audience was urged to contemplate the profound implications of truth in the pursuit of collective freedom. This spiritual dimension added a transcendent layer to the discourse, emphasizing the interconnectedness of individual moral awakening and the broader societal transformation that PNG so ardently seeks.
In weaving biblical insights into the fabric of academic dialogue, the presentation went beyond the conventional boundaries of discourse, inviting contemplation on the role of divine guidance in shaping the ethical landscape of a nation at a crossroads. The harmonious intersection of faith and academia in this instance underscored the profound impact that spiritual wisdom can have on intellectual pursuits, particularly when addressing the pressing issues of morality and corruption.
Echoes of Wisdom – Sir Mekere Morauta’s Prophetic Legacy Resonates:
In a moment of reflection, the speaker paid homage to the late Sir Mekere Morauta, whose prophetic insights continue to reverberate in the corridors of national discourse. Morauta’s characterization of PNG’s corruption as both ‘systemic and systematic’ became a focal point, marking a poignant juncture in the presentation.
The speaker, with a solemn acknowledgment of the gravity of Morauta’s words, highlighted the worsened state of affairs since the late statesman’s astute observation. The unfolding narrative underscored the pressing need for comprehensive and transformative measures, as the entrenched issues identified by Morauta have deepened, casting a shadow over the nation’s ethical landscape.
Sir Mekere Morauta’s legacy, with examples also drawn on how he led CG interventions at PNGSDP to fortify it’s intended ppurpose, became a rallying point for the presentation. The gravity of the situation served as an urgent call to action, prompting a collective introspection on the responsibility borne by each citizen in steering Papua New Guinea towards a more ethical and transparent future.
In honoring Sir Mekere Morauta’s contributions, the speaker not only acknowledged the accuracy of his characterization but also emphasized the imperative for decisive, transformative changes. The legacy of Sir Mekere Morauta, it was evident, serves as a guiding light in navigating the complex terrain of corruption that demands a comprehensive and systemic response.
Corporate Governance is the Silver Bullet for National Healing:
In the core of the discourse a resounding assertion took center stage—the belief that Corporate Governance (CG) consciousness acts as a potent silver bullet, offering a pathway to heal Papua New Guinea (PNG) from the pervasive peril of corruption. The heart of this proposition lies in the recognition that CG, firmly rooted in moral principles, possesses the transformative power to guide organizations and individuals toward ethical decision-making, transparency, and accountability.
The speaker articulated the idea that CG serves as more than a regulatory framework; it embodies a moral compass steering entities away from the quagmire of corruption. By emphasizing adherence to ethical principles, CG becomes a powerful force for positive societal change, offering a comprehensive remedy to the deep-seated issues that have hindered PNG’s progress.
This concept was expounded upon, using the case study on PNGSDP as an example, highlighting how CG, when embraced conscientiously, can foster an environment where integrity prevails over dishonesty and transparency over opacity. The narrative positioned CG as not merely a set of rules but a cultural shift—an ethos that, when internalized, permeates through the fabric of both public and private sectors.
The deliberate use of the metaphor of the “silver bullet” emphasized the potential for CG to be a decisive and transformative solution, capable of piercing through the complexities of corruption that have plagued the nation. It portrayed CG as a unifying force, bridging gaps between moral aspirations and practical implementation, setting the stage for a rejuvenated and morally conscious PNG.
As the discourse unfolded, the audience was invited to envision a nation where the principles of Corporate Governance serve as a catalyst for positive change, reshaping the narrative and steering PNG towards a future defined by ethical governance, transparency, and a collective commitment to healing the wounds inflicted by corruption.
Wisdom Echoes from Burke and White to Illuminate the Path to Societal Renewal:
Though not stated in the presentation due to time limitations it was an obvious insinuation of the timeless wisdom of two influential figures—Edmund Burke and Ellen G. White. Their insights, each representing a unique facet of moral and ethical guidance, provided a compelling foundation to understand the speaker’s appeal to the audience’s sense of responsibility in the face of corruption.
Edmund Burke’s enduring maxim, “The only thing necessary for the triumph of evil is for good people to do nothing,” is a call to action. This ageless wisdom underscores the imperative for individuals to actively engage in the pursuit of good governance. It serves as a reminder that apathy and inaction can inadvertently contribute to the perpetuation of corruption, emphasizing the profound impact that collective responsibility can have on societal outcomes.
Another timeless citation worth nothing is that of the profound words of Ellen G. White, who emphasized the indispensable role of individuals with unwavering moral principles.
” The greatest want of the world is the want of men-men who will not be bought or sold; men who in their inmost souls are true and honest; men who do not fear to call sin by its right name; men whose conscience is as true to duty as the needle to the pole; men who will stand for the right though the heavens fall” [EG White, Education, P57, pp3]
These individuals were portrayed as the bedrock of a society striving for excellence—an essential element in the quest for ethical governance. White’s wisdom resonates as a clarion call for individuals to stand firm in their commitment to moral integrity, irrespective of external pressures or prevailing challenges.
Together, the insights of Burke and Ellen G. White formed a compelling narrative that urged the audience to recognize the transformative power inherent in their individual actions. By intertwining these guiding philosophies, the speaker crafted a message that underscored the profound influence individuals can have in shaping a society that aspires to the highest ethical standards. In essence, the wisdom of these masters illuminated the path to societal renewal and transformation, emphasizing the indispensable role of personal commitment in the collective pursuit of excellence.
Hope on the Horizon: UPNG’s Corporate Governance Initiative:
As the presentation approached its zenith, a glimmer of hope emerged—the recently introduced Post Graduate Diploma in Corporate Governance Program by the UPNG School of Business and Public Policy. Positioned as a crucial step in the journey toward evangelizing corporate governance consciousness in PNG, the program aims to instill the values of integrity, transparency, and accountability in future leaders.
In retrospect, the presentation transcended the boundaries of a traditional academic exercise; it was a heartfelt plea for a nation to rediscover its moral compass through the lens of Corporate Governance. The speaker remains optimistic that the message conveyed will spark change and inspire a collective commitment to building a more ethically conscious Papua New Guinea. This special edition invites readers to reflect on the potential for transformation in the wake of this compelling discourse.
In the heart of Papua New Guinea lies Porgera, a place blessed with an abundance of gold deposits. This land is not just a geographical location; it is home to a community of people – the Ipili people. The story of Porgera is one of stark contradictions. On one hand, it boasts vast riches beneath its soil, promising economic prosperity. On the other, it is plagued by internal conflicts and a fundamental lack of trust among its people, obstructing any meaningful progress.
The curse of disunity looms over Porgera, casting a shadow on the prospects of tangible community development. It is vital to explore how these internal issues can hinder the realization of benefits that should rightfully flow from the land. Over the past three decades, the primary beneficiaries of the mining operations have seemingly been the legal representatives of the various factions within the Porgera community. They continue to thrive amidst the turmoil, while the community itself remains trapped in a cycle of discord and missed opportunities.
For the people of Porgera, the disunity has become a roadblock to their own progress. The community’s internal conflicts have, in many ways, hindered their ability to benefit from the wealth of the land. Instead of collectively harnessing the opportunities presented by the gold deposits, they find themselves engaged in disputes that often result in stalemates. These disputes can range from issues concerning land ownership to the distribution of mining revenue, each dispute becoming another obstacle to their shared prosperity.
Examples of missed opportunities are not hard to find. When infrastructure projects, educational initiatives, or healthcare programs are proposed, they often get caught in the crossfire of internal disagreements. Funds that could be invested in these essential services end up being diverted to legal battles and conflict resolution efforts. Consequently, the community misses out on tangible improvements in their quality of life, improvements that could have been a direct result of the resource wealth at their doorstep.
One might argue that the government of Papua New Guinea, mandated by its constitution to prioritize national interest, might not have the patience or inclination to intervene in Porgera’s internal trust issues. The government’s focus on national interest is understandable, but it should not mean turning a blind eye to the plight of the very communities from which the wealth is extracted. A nation’s true strength lies in the well-being and prosperity of all its citizens, including those in resource-rich regions like Porgera.
The future of Porgera is intertwined with its ability to overcome the curse of disunity. The community must recognize that their internal conflicts do more harm than good and actively seek reconciliation and cooperation. Sustainable development plans should be formulated, addressing both the economic and social needs of the community. Moreover, it’s essential that the benefits from the gold deposits are shared equitably among the community members to ensure their collective prosperity.
In conclusion, Porgera stands at a crossroads. The riches within their land can either be a beacon of hope or a source of continued strife. The curse of disunity is their greatest obstacle, and it is only through collective effort, reconciliation, and a shared vision for a better future that they can break free from its grip. The missed opportunities of the past should serve as a lesson, reminding them that unity is the key to unlocking the true potential of their land and their people.
The 2023 Supplementary Budget Speech delivered by the Hon. Ian Ling-Stuckey, CMG, MP, on the 12th of October 2023 has to be met with scepticism by many citizens in Papua New Guinea. The daily reality experienced on the ground is too far from the claims in the speech. The speech outlines the government’s view of a strong and growing economy, but there are several indicators on the ground that appear to contradict this narrative.
1. Employment Opportunities:
The Treasurer points to economic growth but fails to address the critical issue of job opportunities. Economic growth should ideally lead to increased employment and a decrease in unemployment rates. However, the reality in PNG, as pointed out, is quite different. The closure of existing mines and the loss of over 5,000 jobs is a stark reminder of the challenges faced in providing employment opportunities. The government should focus on creating sustainable job growth to truly reflect economic progress.
2. Wage Increases:
Economic growth should result in improved wages and income for workers. Unfortunately, the minimum wage remains stagnant, and there’s little evidence of substantial wage increases. This disparity between claimed economic growth and the reality of wage stagnation raises concerns about the distribution of wealth and whether the benefits of growth are reaching the average citizens.
3. Standard of Living:
The government highlights improvements in healthcare, education, and public services as indicators of economic growth. However, many citizens experience a decline in these services. The shortage of medical drugs in hospitals is just one example. The government should prioritize transparency and efficient resource allocation to ensure that the standard of living for all citizens improves, not deteriorates.
4. Price Stability:
The claim of low inflation and stable prices doesn’t align with the increasing cost of living faced by citizens. Rising fuel prices, doubling prices of basic food items, and exorbitant house rentals create a stark contrast to the government’s narrative. Price stability is a key aspect of economic well-being, and the government should address these concerns first before sweet-talking the realities away in the honourable house.
5. Increased Investment:
The lack of new foreign investments, especially in the mining and petroleum sector since the stupid amendment to the Mining Act in 2020, is a matter of concern. Economic growth is often associated with increased investments, both domestic and foreign. The government should work on creating an environment conducive to investment and reevaluate policies to attract new investors.
6. Government Services:
While the government claims to be improving public services, the chronic shortage of essential medical drugs in hospitals is just one example of the gap between rhetoric and reality. Citizens expect to see tangible improvements in public transportation, public safety, and social welfare programs, and the government must deliver on these promises.
In conclusion, the citizens of Papua New Guinea deserve a government that provides accurate and honest information about the state of the economy. Transparency and accountability are essential in building public trust. The only MP in parliament who seem the understand the misnomer, as the speech was presentes is the Member for Chuave, Hon James Nomane, who debated with substance (Click here for the video of his debate ). The indicators on the ground suggest that there is a need for a more comprehensive and inclusive approach to economic development to ensure that the benefits of growth reach all citizens. It’s the duty of elected representatives to provide the truth to the citizens and work towards their betterment, even if it means acknowledging challenges and addressing them sincerely.
Restoring Confidence in the Rule of Law in Papua New Guinea – a letter of gratitude to the PNG Judiciary
Dear Honorable Members of the Papua New Guinea Judiciary,
I pen this letter with profound gratitude and a renewed sense of hope for our beloved nation. Your recent judgment in the matter of embezzlement offenses has not only delivered justice but has also provided our people with a significant reassurance in the rule of law. Your perspective on the impact and seriousness of these offenses, along with their broader implications for Papua New Guinea, is deeply appreciated.
Your wisdom and diligence in assessing the gravity of these embezzlement offenses are commendable. In Paragraphs 38 to 43 of the ruling [CR (FC) No. 118 OF 2019 The State V Paul Paraka] concluded on the 4th of October 2023, you eloquently articulated the profound ramifications of such acts, going beyond mere financial losses. You astutely recognized that the stolen funds were not just numbers on paper but represented the aspirations of our citizens for a better future. The fact that these funds belonged to the Independent State of Papua New Guinea and its people is a sentiment that resonates deeply with all of us.
Your words, “The loss of State monies is not some abstract concept. It has real and enduring social and economic impacts even if it is difficult to quantify them,” encapsulate the heartache and suffering endured by our citizens due to these ongoing embezzlement offenses. Your empathy for the victims, even when they could not be present to share their stories, demonstrates your commitment to ensuring justice prevails.
Furthermore, your acknowledgment of the far-reaching consequences of such crimes on public confidence is highly perceptive. It is essential for our people to trust in the institutions that govern our nation. Your statement that these offenses reflected poorly on the Office of the Solicitor-General and the State lawyers, and the collaboration with individuals within the Department of Finance, resonates deeply with our collective concerns. The erosion of public confidence is a matter of grave concern, especially during times when government resources are scarce and corruption is on the rise.
Your recognition of the potential impact on Papua New Guinea’s international standing and its ability to attract foreign investments is a stark reminder of the global implications of these crimes. Your wisdom serves as a beacon for those who seek to uphold the integrity of our nation on the international stage.
Lastly, your acknowledgment of the prevalence and increasing sophistication of such offenses underscores the challenges we face as a society. Your vigilance in addressing these issues head-on is a testament to your dedication to the well-being of Papua New Guinea and its people.
In conclusion, Honorable Members of the Papua New Guinea Judiciary, your judgment has not only restored confidence in the rule of law but has also rekindled hope for a brighter future. Your unwavering commitment to justice and your understanding of the broader implications of these embezzlement offenses have left an indelible mark on our nation. We, the citizens of Papua New Guinea, extend our heartfelt thanks for your invaluable service to our beloved country.
With the utmost respect and gratitude,
Meck J. Minnala
On Behalf of the Citizens
Disclaimer:
I, Meck Minnala, the author of the letter of gratitude addressed to the Papua New Guinea Judiciary, hereby solemnly declare and clarify the following:
I have no personal issues, grievances, or grudges of any nature with the offender who was recently sentenced by the Judiciary.
My intent in expressing gratitude through the letter is solely based on the Judiciary’s role in restoring confidence in the rule of law and the broader implications of the sentencing for the people of Papua New Guinea.
I hold the utmost respect for the offender as a senior citizen of our country, and my letter is in no way meant to diminish his standing or character.
The purpose of the letter is to acknowledge the Judiciary’s dedication to justice and its significant impact on our nation’s well-being.
The letter is a sincere expression of hope and appreciation for the positive change that has been brought about by the Judiciary’s actions.
I make this declaration voluntarily and without any external influence.
By Meck J. Minnala | University of Papua New Guinea
INTRODUCTION
The most serious challenges within the public sector remain the depletion of human resources and physical infrastructure as well as the desperate need to upgrade and develop outdated administrative practices. These practices have rendered public institutions unable to cope with the increasing demand for essential services. If not addressed, such a state of affairs will continue to curtail the development of the political and economic systems at the national and regional levels, seriously hindering the attainment of national development goals, including the Millennium Development Goals (MDGs) (UN-ESCWA, 2010:3). This paper gives a general overview of a review into the efficacy of corporate governance frameworks of Porgera Development Authority (PDA), as a semi-government body, established under 1989 Memorandum of Understanding (MoU) between the Independent State of Papua New Guinea (hereinafter referred to as ‘the state’) and the Enga Provincial Government as part of a series of agreements developed following the Mining Development Contract (MDC) for the commencement of the Porgera Gold Mine in Enga Province. It includes a general background of the authority, a general statement of the problems identified, review objectives and review questions.
BACKGROUND OF THE REVIEW
The performance of state-owned-enterprises is of paramount importance to the country’s population and other private business sectors. Consequently, the governance of these entities is critical to ensure their positive contribution to the overall country’s economic efficiency, effectiveness and competitiveness. This is buttressed by
“OECD experience has also shown that good corporate governance of state owned entities is an important prerequisite for economically effective privatization, since it will make the enterprises more attractive to prospective buyers and enhance their valuation,’’ http://www.oecd.org,accessed 29 April 2022.
Papua New Guinea experienced an economic decline that was caused by a number of factors. Lack of capital support, shortages of foreign currency, liquidity crunch and a variety of supply-side bottlenecks such as electric power, fuel, and imported inputs were some of the factors leading to the economic decline. The demise of quality corporate governance was caused by the skills flight that was witnessed during the stated period. Following the establishment of the inclusive government, stimulating investment was adopted and corporate governance frameworks in state owned enterprises was introduced with the creation of the Ministry of State Enterprises in year 2014.
The 2013 national budget statement recommends the implementation of economic governance and this entails ‘’… improving regulation and operational efficiency of institutions that offer essential services like licenses, electricity, water etc. ’It further asserts that ‘’fighting rent-seeking behavior and corruption should be prioritized.
The Porgera Development Authority
The 1989 MoA between the state and provincial government specified that a statutory authority be set up for the following purposes:
maintenance of the airstrip at Kairik;
receipt of royalties;
administration and spending of any funds made to it by the CFG;
advising the provincial government on lifting the liquor ban in Porgera District;
assisting the provincial town planning board in planning the township at Porgera and controlling and monitoring that planning; and
any other matters assigned to it by the enacting legislation.
In 1998, the Porgera Development Authority (PDA) was officially transformed into the Porgera-Paiela Local-level Government Special Purposes Authority. The MoA that changed the status of the PDA specified the following functions for it:
implement the construction of infrastructure on behalf of the national government, provincial government, and LLGs within the Porgera District;
help the Porgera and Paiela-Hewa LLGs to implement their administrative functions;
manage the construction and operation of facilities in Paiam, Porgera, and Kairik towns;
manage the payment of royalties and other mine-related income in the Porgera District;
manage and operate the Porgera District Hospital;
advise the landowners and LLGs on natural resource project agreements;
implement the functions of the Tenders Board, Building Board, and Physical Planning Board and other functions delegated to it by the national government, provincial government, or LLGs; and
receive funds on behalf of the Porgera and Paiela-Hewa rural LLGs and make payments as directed by them.
Its structure was determined by the MoA to include the following members as board members and it also reflected in its constitution:
two people appointed by the Porgera Local Government Council;
two people appointed by the SML landowners;
the Provincial Minister for Finance;
the Provincial Member for Porgera;
the Secretary of the Department of Enga or his nominee;
the zone coordinator of the Porgera Zone;
a person appointed by the Secretary of the Department of Finance and Planning;
a person appointed by the PJV; and
two people from the Porgera District with professional or managerial skills and experience.
Its financial affairs were made subject to the provincial Treasury Act or any succeeding legislation.
The PDA receives a number of revenue streams from the PJV and other sources to fulfil its obligations as laid out in its constitution. In a sense, funds flowing to the PDA are accruing to the landowners, to whom they provide indirect benefits such as health, education, and infrastructure (see Figure 15).
Figure 1: Financial Allocation to the Porgera Development Authority
The PDA is to some extent, the bridge between the expectations for development and the financial payments to achieve that development. However, it is not immune from criticism; for example, it lacks an adequate approach to HIV prevention (Kolo, 2009)
The greatest concern for those most affected by the mine is the lack of publicly available information on the expenditure of funds. Based on the information that is available, it is estimated that the PDA received K240 million, although this is likely to be a substantial underestimate since it does not include funds from the public investment program (Johnson, 2012)
Between 2019 and 2020 I was an ex officio member of the governance board and there is privy to a lot of the reflection which I will be sharing as part of this review.
The Establishment of Special Purposes Authorities
The Special Purpose Authorities were established to serve the interest of landowners of Mining and Petroleum impact project areas. The Special Purpose Authorities created under the Act of Parliament include Porgera, Kutubu, Moran, Hides, Komo, Koiari and Nimamar LLG Special Purpose Authorities.
A Local Level Government Special Purpose Authority (LLGSPA) is an authority that is established by proclamation under the Local Level Governments Administrations Act 1997.
The Head of State is responsible for establishing a LLGSPA. He will establish a LLGSPA based on the advice of the National Executive Council (NEC). The Head of State will establish a LLGSPA by proclamation. The proclamation shall specify the purposes for which the Authority is established and such other matters as may be necessary. [See Section 42 of the Local Level Governments Administrations Act 1997]
The NEC advises the Head of State to establish a LLGSPA. However, before the NEC can give such an advice, it considers recommendations submitted by the Minister to establish a LLSPA. The Minister may make this commendation:
on his own initiative, after consultation with the Local-level Governments concerned; or
upon recommendations from one or more local level government (LLG).
(See Section 43 (1) of the Local Level Governments Administrations Act 1997)
Where one or more Local-level Governments (LLG) is or are of the opinion that an Authority should be established to assist the implementation of LLG functions, the LLG concerned shall so recommend to the Minister. (See Section 43 (2) of the Local Level Governments Administrations Act 1997)
A recommendation by the Minister on his own initiative or a recommendation to the Minister by a LLG to establish a LLGSPA shall be in writing and shall contain particulars of the recommend authority:
the general purpose; and
the management; and
the funding; and
the staffing,
The recommendation shall also contain the requirements for:
the particular function or functions to be implemented; and
the area or areas to which it should apply; and
such other particulars as are considered relevant.
Where a recommend is made by an LLG, the Minister shall consider a recommendation and where he considers the establishment of the Authority desirable, he shall then submit the recommendation to the NEC for consideration as to whether the Head of State should be advised to make the proclamation. (See Section 43 (3) (4) of the Local Level Governments Administrations Act 1997)
Incorporation of a LLGSPA
If upon recommendation by the Minister, the NEC advises the Head of State to proclaim the establishment of a LLGSPA, the LLGSPA will then be incorporated. Once incorporated, a LLGSPA:
is a corporation; and
has perpetual succession; and
shall have a seal; and
The LLG has the power:
to acquire, hold, dispose of, mortgage or pledge property; and
to enter into contracts; and
to borrow money; and
to invest funds; and
to institute and defend actions, suits and other legal proceedings; and
to do all things necessary for the effective exercise and performance of its powers and functions.
(See Section 44 of the Local Level Governments Administrations Act 1997)
Who manages the LLGSPA?
The LLGSPA shall be managed by a managing body. The managing body shall consist of the members as prescribed in the proclamation. When making the proclamation, the Head of State, will provide the respective entities from which a member may be nominated from to join the managing body of an LLGSPA. The LLGSPA may then specify in its Constitution the membership, manner of appointment and terms and conditions of appointment of members of a management body.
The membership of the managing body shall not include a member of a LLG. The operations of a LLSPA shall be kept separate from a LLG. (See Section 45 of the Local Level Governments Administrations Act 1997)
The Head of State may make certain variations on the following aspects of an LLGSPA:
vary its general purpose; or
vary its composition of membership of the management; or
vary its funding; or
vary its staffing; or
vary its particular function or functions to be implemented; or
vary its area or areas; or
change its name; or
vary such other particulars as are considered relevant and as might be provided for in the proclamation being varied,
Furthermore, the Head of State can vary a LLGSPA by amalgamating it, in whole or in part, to two or more LLGSPA.
These variations shall be made by the Head of State through a proclamation. In a proclamation, the Head of State may make provision for the taking over by of the whole or part of the assets and liabilities of the LLGSPA by:
the State; or
another LLGSPA; or
a Local-level Government or Local-level Governments.
The Head of State will make such a proclamation upon advice from NEC. (See Section 46 of the Local Level Governments Administrations Act 1997)
Can a LLGSPA be dissolved?
Yes, it can. The NEC shall advise the Head of State to dissolve a LLGSPA. Upon advice from NEC, the Head of State may dissolve a LLGSPA. The Head of State may do so by making a proclamation. A proclamation for dissolution of a LLGSPA shall only be made upon consideration of the recommendation in the manner as set out under Point E above.
In a proclamation, the Head of State may make provision for the taking over of the assets and liabilities of the LLGSPA by:
the State; or
another LLGSPA; or
a Local-level Government or Local-level Governments.
(See Section 47 of the Local Level Governments Administrations Act 1997)
What are the powers and functions of a LLGSPA?
The NEC shall advise the Head of State to vest in a LLGSPA any of the powers of the LLG and the duties and responsibilities of a LLG. However, a LLGSPA shall not be vested with a LLG’s:
Power to make local-level laws; or
Power to impose or levy rates, taxes, charges or fees; or
executive powers; or
a power, which any other law may forbid a LLGSPA from exercising,
The powers which may be vested in a LLGSPA shall not exceed the powers of a Local-level Government. No power may be vested in a LLGSPA so as to have the effect of divesting a Local-level Government of that power.
Furthermore a LLGSP may act as an agent for the State for any matters within its purposes if so directed by the Head of State. A LLGSPA, however, have no power or function over a Ward Committee. (See Section 48 of the Local Level Governments Administrations Act 1997)
Does a LLGSPA make annual reports?
Yes, it does. A LLGSPA shall, at least once in each year at such time as is directed by the Minister after consultation with the Local-level Government or Local-level Governments concerned, present a report reviewing the operations of the LLGSPA during the period since the last report to:
the LLG or LLGs concerned; and
the Minister.
(See Section 50 of the (Level Governments Administrations Act, 1997))
Corporate Governance and Special Purpose Authorities
Good corporate governance of State Owned Enterprises is a major challenge in many in Papua New Guinea. State Owned Enterprises are deeply implicated in dismal financial and operational performance problems because of their provision of poor products and services, inefficiencies and losses. This review delves into the efficacy of corporate governance in these enterprises. The review focuses more on the corporate governance frameworks, the organizational and human factors influencing malpractices and the effect of malpractices (corruption) in job performance. The study seeks to evaluate the effectiveness of corporate governance in Special Purposes Authorities using the Porgera Paiela LLG Special Purpose Authority (PPLLGSPA), more commonly known as Porgera Development Authority (PDA), as a study case. For the purpose of this paper we use PDA to refer to PPLLGSPA.
Definition of Corporate Governance
There is no single accepted and acknowledged definition of corporate governance.
Knell (2006:5 & 6) started by defining governance and it is defined as
‘’to control and regulate the exercise of influence, to maintain good order and adherence to predetermined standards of behavior…..Corporate governance is then defined as ‘’the regulating influence applied to the affairs of a company to maintain good order and apply predetermined standards“
Solomon and Solomon (2004:14) based on their research came to a conclusion that corporate governance:
‘’is the system of checks and balances, both internal and external to companies, which ensures that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all areas of their business activity’’
Ghillyer (2010) defined corporate governance as: “the process by which organizations are directed and controlled”.
Corporate governance is associated more specifically with the structures and processes related to management, decision-making and control in a company. It is explained that corporate governance is about the way in which boards oversee the running of a company by its managers and how board members are in turn accountable to the shareholders and the organization or company. Corporate governance has implications for organization or company behavior towards shareholders, employees, banks, customers and society. The Bank of Papua New Guinea provides this definition of corporate governance as “the system by which companies are directed and controlled” It further explains that corporate governance involves regulatory and market mechanisms, and the roles and relationship between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed. It also provides the main external stakeholder groups which include shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the company’s activities. Internal stakeholders are the board of directors, executives and other employees (Bank of Papua New Guinea, 2021)
Monk and Minow (2008) asserted that one factor that can make the difference between smart and dumb choices, are corporate governance. In essence, corporate governance is the structure that is intended to make sure that the right questions get asked and that checks and balances are in place to make sure that the answers reflect what is best for the creation of long–term, sustainable value .
The Organization for Economic Corporation and Development (OECD), described corporate governance as involving
“A set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set and how the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interest of the company and its shareholders and should facilitate effective monitoring” (OECD 2004:11)
Corporate Governance in Papua New Guinea
Before we zoom in on our case in point, being Porgera Development Authority we must also get an appreciation of the national environment under which the Special Purpose Authority is embedded.
Papua New Guinea has undergone several changes in both the structure and conduct of business. Several years ago the economy witnessed moral bankruptcy, unethical behavior and absence of executive accountability experienced by some organizations. The result of all this was business failures and the eventual collapse of a number of corporations resulting in significant economic and social costs to the country as a significant number of people lost their savings and jobs. Rampant corruption designed to cripple the economy and diminish the condition of livelihood of the PNGean people was experienced (PNGi, 2021). Good corporate governance requires corporate boards to be accountable, loyal, responsible, transparent and independent in order to act in the best interests of the organization and society. This Banking Prudential Standards BPS300 – Corporates Governance, which now closely regulates the superannuation and financial institutions was conceived with the following objectives in mind;
Encourage leadership to adopt high standards of corporate governance and integrate decisions with strategy and sustainable development.
Introduce a well-defined national and ethical value system and define the precision with which entities should be governed, controlled and directed.
It is further aimed, in every way possible, to eradicate corruption, encourage disclosure, improve performance, competitiveness, quality of corporate governance and consequently, give a solid and sound governance foundation for key overseeing management and board of directors.
Promote ethical and responsible decision making as well as safeguarding integrity in business leadership and management by building high performance boards of directors anchored on transparency, accountability and fairness as central value components
It is also observed by the regulating central bank that some of the benefits accruing from the standards include:
The injection of much needed investment
Elimination of any corruptive conduct in corporate governance improves the image of the country
Impact positively on the operational efficiency of corporations and business
Economic growth and poverty alleviation
Every state enterprise, or parastatal organization like PDA, should adhere to and implement the principles of sound corporate governance policies, procedures and practices, as required by the Public Finance Management Act (Chapter 22:19) (PFMA). Anecdotal evidence points to the current culture of people in various institutions not adhering to or complying with statutory and regulatory frameworks in place. The question is; what is it that could be done to make sure that people in general, businessmen/women, directors and senior managers in particular comply with and conform to set principles and laws.
The Papua New Guinea Institute of Directors strongly believes that PNG should have its own national code on corporate governance that should take into account the country’s peculiar corporate governance challenges. They observed that as a country, PNG has been ‘dogged’ by continued negative publicity emanating from company closures, reduced industrial capacity utilization, high unemployment, banks going under curatorship and others closing, abuse of shareholder funds or assets, fraud, environmental contamination, among others (PNGID, 2021)
Corporate Governance Theoretical Frameworks
There are a number of theories that have affected or influenced the development of corporate governance. (Malin, 2007) highlighted that the main theory that has affected corporate governance is the agency theory. He pointed out that stakeholder theory is also coming into play as companies increasingly become aware that they cannot operate in isolation and that, as well as considering their shareholders, they need also to have regard to a wider stakeholder constituency. The Corporate Government theories are shown below:
Figure 2: Corporate Governance Theories
Source; own diagram adapted from (Malin, 2007)
Agency Theory at Porgera Development Authority
The agency theory defines the managers as the agents and the shareholder as the principal (Solomon, 2004). The shareholder (owner) delegates the day to day decision making in the company to directors who are the agents. The challenge that arises as a result of this system is corporate ownership is that the agents do not necessarily make decisions in the best interest of the shareholders. In the context of Porgera Development Authority the shareholders, or principals, are:
Porgera Rural Local Level Government,
Paiela Rural Local Level Government,
Enga Provincial Government
Porgera Landowners Association; and
The State through the Department of Provincial and Local Level Government.
In the 30 years of the PDA’s existence the goals of the principal and agent, being the management of PDA, has always been in conflict. Managers are supposed to be the agents of a corporation’s owners’, but managers must be monitored and institutional arrangements must provide some checks and balances to make sure they do not abuse their power. It must be noted that though the PDA constitution provides a general scope of the powers and administrative limitations of the management team the Human Resources Management Manual of the company is manipulated such that managers have not been representing the best interest of the agents (The National, 2016). The agency costs resulting from managers misusing their position, as well as the costs of monitoring and disciplining them try to prevent abuse has been recurrently high for this third tier government agency.
Stakeholder Theory and Porgera Development Authority
Solomon and Solomon (2004) suggested that a basis for stakeholder theory is that companies are so large and their impact on society so pervasive that they should discharge accountability to many more sectors of society than solely their shareholders. They further state that stakeholders include shareholders, employees, suppliers, customers, and creditors, communities in the vicinity of the company’s operations and the general public. The stakeholder theory is demonstrated in figure 2.1 below
Figure 3 Stakeholder Theory at Porgera Development Authority
Source: Own diagram adapted from (Ghillyer, 2010)
The OECD Principles of Corporate Governance
The Organization for Economic Co-operation and Development (OECD) 2009 came up with some principles of corporate governance in 1999. In order the assess the performance of the Porgera Development Authority we shall make a comparative listing of OECD principles for corporate governance. The following OECD principles were reviewed and revised in 2004:
PRINCIPLE
NARRATIVE
i
Ensuring the Basis for an Effective Corporate Governance Framework
The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.
ii
The Rights of Shareholders and Key Ownership Functions
The corporate governance framework should protect and facilitate the exercise of shareholders’ rights.
iii
The Equitable Treatment of shareholders
The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
iv
The Role of Stakeholders in Corporate Governance
The corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active co- operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
v
Disclosure and Transparency
The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company.
vi
The Responsibilities of the Board
The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.
Table 1: OECD principles of corporate governance – Source: Mallin (2007: 32.)
THE SEVEN CHARACTERISTICS OF GOOD CORPORATE GOVERNANCE:
The King Report on Corporate Governance for South Africa (The Kings Report, 2010) provides seven characteristics of good corporate governance principles and practices. For the purpose of this this review I will list the principles from the Kings Report and make comparative commentaries in the context of Porgera Development Authority’s observed performances.
Principal
Expected Behavior
PDA’s Performance
1
Discipline
A commitment by a company’s senior management to adhere to behavior that is universally recognized and accepted to be correct and proper.
The company’s senior management, even though some are even expatriates, their lack of prudence in their expected behaviors is highly deplorable. Recurrently they failed to deliver on their performance indicators.
2
Transparency
A measure of how good management is at making necessary information available in a candid, accurate and timely manner – not only the audit data but also general reports and press releases.
In the time that I was a board member I have never seen a properly audited financial reported being presented to the board. If anything they were always incomplete. The incomes generated from the subsidiary companies like Paiam Housing Development Company and Paiam Hospital where never presented. Paiam Hospital actually went to insolvency and the state unceremoniously took over the facility. In 2016 the Enga Provincial Government, as one the key stakeholders (Principal) asked for the books to be audited (EMTV News, 2016) but a court injunction by the Board chairman at that time prevented it from happening.
3
Independence
The extent to which mechanisms have been put in place to minimize or avoid potential conflicts of interest that may exist, such as dominance by a strong chief executive or large shareowner. These mechanisms range from the composition of the board, to appointments of board committees and external auditors, the decisions made, and internal processes established, should be objective and not allow for undue influences.
All composition of the board is stipulated in the constitution of the authority but the manner in which the non-ex-officio members are elected has always been flawed that on numerous occasions they always ended up in the courts (Post Courier, 2017). Refer Waigani National Courts Court orders of OS NO 152 OF 2021. The general manage then took advantage and squandered funds from the company to support his run for the provincial governorship in the then National General Election but was subsequently terminated by the new board (The National, 2016).
4
Accountability
Individuals or groups in a company, who make decisions and take actions on specific issues, need to be accountable for their decisions and actions.
Transparency is key to accountability. However at PDA the managements reporting obligation, is often regarded by boards as a necessary task rather than a desirable one, with only minimum levels of disclosure provided. Unfortunately the PDA board does not even receive a fully furnished report itself.
5
Responsibility
Responsibility pertains to behavior that allows for corrective action and for penalizing mismanagement. Responsible management would, when necessary, put in place what it would take to set the company on the right path.
At PDA it took more than three years to terminate a Managing Director who was embezzling funds from the company and also it took 27 years to remove a former board member who was nominated to sit at the Board of Mineral Resources Enga (MRE) and fraudulently redirected benefits from the income stream from MRE and never submitted a report back to PDA for over 20 years even after he was no longer a board member any more.
6
Fairness
The systems that exist within the company must be balanced in taking into account all those that have an interest in the company and its future. The rights of various groups have to be acknowledged and respected.
Though the representation in the board is structurally fair service delivery and benefits sharing is not at all. The people in the Paiela LLGs, not more than 20 km from the Porgera township, lacks basic services in all forms and shapes though they have two elected representatives in the PDA board to represent their interest.
7
Social responsibility
A good corporate citizen is increasingly seen as one that is non-discriminatory, non-exploitative, and responsible with regard to environmental and human rights issues. A company is likely to experience indirect economic benefits such as improved productivity and corporate reputation by taking those factors into consideration.
The initial intent of the establishment of PDA, and one of its fundamental responsibility is to service the communities. It seem to have started well in the early 1990s but from the onset of the new millennia those social investment projects have deteriorated. PDA could not even support Porgera International School which is its own subsidiary operation at this time.
Literature Review – What Happens When Corporate Governance Fails?
According to Solomon and Solomon (2004) the Enron saga presents a poignant illustration of what happens when corporate governance is weak and when the checks and balances are ineffective. They further asserted that if there was unethical behavior at the highest level, little if anything, can avoid eventual disaster.
Monetary policy statement by the Minister of Finance (2013) observes that the global financial crisis and its dampening effects on global economic activity, which almost brought the international financial system to a screeching halt, was largely attributed to failures and weaknesses in corporate governance arrangements.
Cadbury (1992) cited by (Ghillyer, 2010) observed;
That the code of best practice was designed to achieve the necessary high standards of corporate behavior. By adhering to the code, companies will strengthen both their control over their businesses and their public accountability. In so doing they will be striking the right balance between meeting the standards of corporate governance now expected of them and retaining the essential spirit of enterprise”.
Knell (2006: 17) observed that;
”in both Enron and WorldCom, the rot stemmed from the top. A regime of dishonesty was encouraged and few had the nerve to blow the whistle; the executives involved were totally driven by their personal reward. Boardrooms were totally lavishly rewarded friends who would not create waves or ask difficult questions. The independent Non-Executive Directors (NEDS) were heavily rewarded and their independence was questionable. The watch dogs (auditors) were bribed with generous non-audit work, making their audit report somewhat fanciful’’.
Mallin (2007) found that companies with active and independent boards appear to perform much better that those with passive, non-independent boards. She further cites McKinsey‘s survey concluded that the majority of investors would be prepared to pay a premium to invest in a company with good corporate governance and the survey observed that good corporate governance in relation to board practices includes a majority of non- executive directors who are truly independent and good responsiveness to shareholder requests for governance information. The survey concluded that the investors perceive and believe that corporate governance is important and that leads to the willingness to pay a premium for good corporate governance. Mallin (2007) cites many authors of various studies that have concluded that there is sufficient evidence in support of the view that good corporate governance improves the long term performance of companies.
Requirements to Strengthen Corporate Governance at Porgera Development Authority
The Porgera Development Authority (PDA) has failed to deliver its objectives and let its stakeholders down repeatedly for a very long time and we can’t let that continue on forever. With the Porgera currently on Care & Maintained and state about to restart the mine under the name tag of New Porgera this service delivery mechanism also needs new corporate operational ecosystem. With the help of literature review above it now provides a platform on what is required to strengthen corporate governance.
Enforcement of rights by minority shareholders – encourage shareholder activism.
Quality of audit – government to strengthen the quality of audit so as to make auditor accountable for the disclosure of information in the annual report and monitor audit firmEnsuring the independence of directors – an appropriate and acceptable system that ensures independence of board to discharge their duties.
Awareness of adoption of corporate governance practice- efforts for propagation of corporate governance norms amongst company for better compliance.
Accountability of the board to stakeholders – efforts to revamp code of conduct for the board members so that they are more accountable to the stakeholders.
Upgrading the efficacy of the system – ensure the quality and effectiveness of the legal, administrative and regulatory framework
Report on corporate governance – make statutory compliance for listed and non-listed companies
The Boards Role at PDA needs to be revamped
The corporate governance efforts by the board also needs to be revamped. The following are the six steps that should be followed by the new look board for it to be truly effective:
Create a climate of trust and honesty– the board of directors and the senior executives should be working in partnership towards the successful achievement of PDA’s organizational goals rather than developing an adversarial relationship where the board is seen as an obstacle to the realization of the general CEO’s strategic vision or the CEO trying to override board functions.
Foster a culture of open dissent– proposals should be open for frank discussion and review rather than subject to the kind of alleged rubber- stamping. Dissent ensures that all aspects of proposals are reviewed and discussed thoroughly.
Ensure individual accountability – rubber stamping generates collective indifference – how can you consider yourself accountable if you were only voting with a clearly established majority? If there is significant fallout from a major strategic initiative, all members should consider themselves accountable. This approach would address any pretense of being ambushed or in the dark.
Let the board assess leadership talent– the board members should actively meet with future leaders in their current positions within the organization rather than simply waiting for them to be presented when a vacancy arises.
Evaluate the board’s performance– Effective corporate governance demands superior performance from everyone involved in the process.
During the swearing in of a new interim board for PDA in 2018 the Secretary for Provincial and Local Level Government Affairs , Dickson Ginua, importantly stressed on good governance to be delivered to the people (LOOP PNG, 2018). He also stressed on the need for transparent reporting to relevant stakeholders.
If the new board is to be a high performing board than it must aspired to achieve the following:
Provide superior strategic guidance to ensure the company’s growth and prosperity
Ensure accountability of the company to its stakeholders, including shareholders, employees, customers, suppliers, regulators and community.
Ensure that a highly qualified executive team is managing the company.”
The ill-fated Predicament of Porgera Development Authority
There is a complete lack of transparency and accountability in many of the institutions associated with the Porgera mine. Comments by the PJV, MRA, EPG and the
Department for Provincial Affairs, indicates that the PDA does not produce the required financial reports, the board is no longer functioning properly, and the legally required annual reports to the minister are not being made. Furthermore, the financial affairs of the PDA are subject to the provincial Treasury Act. This may not have always been the case, but at present there is no accountability, transparency, or adherence to legal requirements.
A Special-Purpose Authority (including the PDA) must present to the LLG and the Minister a report reviewing the operations of the Authority during the period since the last report (if any) has not been provided. A lack of sanctions (such as withholding of funding) makes it almost impossible to provide transparency and accountability on landowner and government institutions.
The MoA agreement stipulates that the PDA cannot be abolished except by the wish of the landowners, funding arrangements such as payments of SSG should be changed until it can be determined with confidence that the money is being spent properly.
Conclusion & Way Forward
This review was developed by looking at the important concepts addressing the corporate governance performance of Porgera Development Authority. In doing so we focused on defining the concept of corporate governance, role of the board, the composition and the corporate governance practices and conduct. It also looked at the benefits and how important corporate governance can be to the company or organization. The presence and effectiveness of corporate governance ensure accountability, transparency, responsibility and discipline on the part of managers and the Board of Directors.
Nonetheless the predicament of PDA is not uncommon to the mannerism of governance of other state owned enterprises or semi-government originations in which poor corporate governance and corruption is prevalent.
Unless the governing board are revamped and the right people with the right attitude are aligned the board room the issues will not run away. It’s about time the entities like the Porgera Development Authority rethink its board structure and appointment process if it is to prosper and become a success story.
Ghillyer, A. W. (2010). Business Ethics: Areal world approach . New York: Published in the United States by Oxford University Press Inc.
Johnson, P. (2012). LODE SHEDDING: A CASE STUDY OF THE ECONOMIC BENEFITS TO THE LANDOWNERS, THE PROVINCIAL GOVERNMENT, AND THE STATE FROM THE PORGERA GOLD MINE. PNG National Research Institute. NRI Discussion Paper No.124, 125.
Kolo, P. (2009). HIV/AIDS Ravaging Porgera Valley. Post Courier, 2.
Level Governments Administrations Act. (1997). Level Governments Administrations Act 1997. Port Moresby: Indepedent State of Papua New Guinea.
Malin, C. A. (2007). Corporate Governance (2nd Edition). New York: Published in the United States by Oxford University Press Inc. Retrieved from 21. Mallin C A: Corporate Governance, 2007, second edition, Published in the United States by Oxford University Press Inc. New York.
Solomon, S. J. (2004). A corporate Governance and accountability. Manchester: John Willey & Sons Ltd ,U.K.
The Kings Report. (2010, March 1). King Report on Corporate Governance in SA. Retrieved from Institute of Directors South Africa: https://www.iodsa.co.za/page/kingIII
Papua New Guinea, a nation celebrated for its cultural diversity and abundant natural resources, grapples with a profound dilemma—a persistent inability to glean insights from its own missteps, particularly within the realm of corporate governance. Over the span of 48 years since gaining independence, successive governments have faced numerous challenges, often failing to address them effectively, thereby perpetuating a vicious cycle of errors. This reflective evaluation delves into the overarching theme that true failure in Papua New Guinea is not merely the occurrence of mistakes but the enduring failure to assimilate the valuable lessons they impart. This article will scrutinize the reasons behind this perpetual pattern, explore the grave consequences it has yielded, and proffer recommendations to chart a path towards recovery, drawing inspiration from renowned corporate governance principles and management insights.
The Perpetual Cycle of Failure
The esteemed Samuel Smiles, a proponent of the view that “he who never made a mistake never made a discovery,” provides an apt lens through which we can assess Papua New Guinea’s persistent governance challenges. Sadly, PNG’s governments have routinely dismissed the profound lessons offered by history, consequently perpetuating a cycle of avoidable errors in corporate governance. This neglect of historical wisdom has impeded the nation’s progress and hindered the maturation of its corporate governance landscape.
The Harvard Business Review’s “The Failure Issue,” which underscores the paramount importance of comprehending, learning from, and rebounding from failure, is illuminating in this context. Nonetheless, Papua New Guinea’s leadership has grappled with a hesitancy to effectively embrace this perspective within the realm of corporate governance. This reluctance to adopt a proactive approach to learning from failures has exacerbated the nation’s governance challenges, undermining its capacity for effective corporate oversight.
The Consequences of Failure to Learn
Papua New Guinea’s escalating national debts, poised to encumber future generations for decades, serve as a stark reminder of the nation’s economic vulnerabilities stemming from inadequate corporate governance. The failure to assimilate lessons from previous financial missteps has contributed significantly to the ongoing economic hardships experienced by the nation.
Critical sectors such as education, healthcare, and infrastructure have endured a distressing lack of progress, reflecting a systemic failure to apply lessons from past corporate governance shortcomings. The stagnation in development underscores the consequences of not learning from governance errors, resulting in suboptimal outcomes for the nation’s prosperity.
Reasons Behind the Stalemate
Successive governments have regrettably prioritized short-term gains over the enduring principles of corporate governance that champion long-term sustainability. This shortsighted approach has exacerbated economic challenges and perpetuated a culture of immediate gratification, undermining the integrity of corporate governance practices.
Frequent changes in leadership have engendered political instability, a formidable impediment to the establishment of consistent corporate governance policies and practices. This instability has compromised the effectiveness of governance mechanisms and hindered the nation’s ability to achieve corporate transparency and accountability.
The educational system in Papua New Guinea has not been adequately equipped to instill a culture of learning from governance failures. This deficiency has perpetuated a cycle of repeating governance mistakes, hindering the evolution of a robust corporate governance framework.
Recommendations for Recovery
Institutionalize Learning: Establishing mechanisms within government institutions for the systematic analysis and application of lessons from past corporate governance failures is paramount. This approach forms the bedrock of effective governance, enabling informed decision-making and sustainable progress.
Long-Term Planning: Encouraging the adoption of corporate governance policies and initiatives that prioritize sustainable development over immediate gains is essential. This approach can foster corporate stability, sound governance, and long-term economic progress.
Education Reform: Investment in education systems that emphasize critical thinking, ethical decision-making, and responsible corporate governance practices is imperative. Such reforms can nurture a generation capable of avoiding the pitfalls of corporate governance history and bolstering the nation’s economic prosperity.
Public Engagement: Fostering a culture of corporate accountability and transparency through the active participation of civil society is indispensable. This engagement empowers citizens to hold corporate entities accountable for their actions, thereby contributing to the nation’s corporate governance transformation.
The Book of Proverbs 24:16 (NIV) says “For though the righteous fall seven times, they rise again, but the wicked stumble when calamity strikes.” This verse emphasizes the resilience and wisdom of the righteous. It acknowledges that even the most righteous individuals may encounter failures or setbacks (“fall seven times”), but what sets them apart is their ability to rise again. The righteous learn from their mistakes, grow stronger, and continue to pursue the right path. this underscores the idea that failure is not the end but an opportunity for growth and improvement. It encourages us to persevere, learn from our failures, and continue to strive for righteousness and wisdom in our actions.
To conclude, Papua New Guinea’s persistent struggle with corporate governance challenges reveals a fundamental failure—a reluctance to learn from mistakes. As the nation grapples with rising national debts and stalled development after nearly five decades of independence, it is imperative that its leadership and citizens unite in cultivating a culture of learning from corporate governance failures. Drawing inspiration from renowned corporate governance principles and management insights, Papua New Guinea can break free from the chains of perpetual governance lapses and embark on a transformative journey towards a brighter economic future, underpinned by effective corporate governance practices.
Some 25 years ago I was teaching in Kainantu High School.
There was a lesson that I taught back then to my boys that have always followed me.
Korkore boys dorm was known for having the filthiest showers and ablution blocks. The headmaster, Mr Hompat tasked me the job as Kokore Dorm matron. I was to make the boys keep the ablution block clean as it was a mere 40 meters or so from the headmasters ( his) house.🤭🤭🙊
Upon inspection, I saw that the toilets were filled with sticks n stones. Long story short, I rolled my sleeves up put on some gloves n rubber boots and some containers of detergent and got the boys cleaning and washing down the ablution block.
After scrubbing all day Saturday the blocks smelled and looked presentable. I then told all the boys to come watch me as I did a mock example of how to sit, flush and use the toilet seat.
Then I had them all sit and also do mock example of using flush toilets.
I proceeded to teach them about the use of toilet paper, toothpaste, toothbrush and deodorant. I explained to them the need for laundry soap and bathing soap and what a shampoo is.
They simply did NOT KNOW…They needed to be taught.
Kokore dorm won the prize for best kept toilets.
Over the years I realized also that our children NEEDED to be taught more then just math science and english, they needed to be taught what it meant to be a “Papua New Guinean”..
You see there is no “Boot camp or summer camp or compulsory military camp”..
In other developed countries they have such “camps” where their young children are sent attend to be taught what it means to be an upstanding good citizen of honor and respect in their country. They are taught RIGHT and WRONG in terms of societal norms. They are “indoctrinated” on what it means to be loyal to their country and nationalism is groomed.
Prior to formal education, we only had the village community teach us. Many lessons in life was taught in the haus man and hausmeri.
Today we have nothing of this sort of “summer camp” the west have… we tried with boys and girls scouts…but that dilapated to nothing today..
We are teaching children to read and write BUT NOT TEACHING them to be valuable, grounded, ethically morally sound Papua New Guineans. We were not teaching or molding them to be personally developed as a sound minded individual. We were not equipping them to be mentally, emotionally socially capable of making sound decisions as responsible citizens.
We had and have an education system that failed to groom upstanding citizens of virtues of honesty, truthfulness, respect and honor.. we failed to raise thousands of honorable leaders to wisely lead our thousands of tribes.
We are raising emotionally estranged and angry young nation builders…who have no mechanisms in place to process their own frustrations in every aspect of life.
Our education system removed the hausman and haus meri rituals that for thousands of years held the fabric of our society intact. Our tribal obligations and tribal institutions of hausman and hausmeri and customs preceeding for example, the entry to manhood and womanhood, or entry to marriage or deaths or births were ingrained with morals and values passed down from generations that protected the tribe and set guidelines to societal norms.
What we are are seeing now is the tip of the iceberg of a massive degeneration of social codes and norms.
We are reaping what we sowed for 40 years.
We do not have the ability or the mechanisms in place within ourselves to deal coherently with stress, conflict or emotional tangles…
We need to mend ourselves from within..individually.
The rise of inequality in living standards, high cost of living, half baked educated population, corrupt leaders and cronies… coupled with our uncanny ability to “adapt, evolve, survive”… is leading to an unrest that will be overunned by Papua New Guineans with self made rules and laws based on a corrupt, malfunctioning societal norm.
We need to fix our hausman.. evolve the hausman and hausmeri … incorporate it into our modern education and ” indoctrinate” our youths on what it means to be a TRUE proud, loyal, honest, respectful and morally sound Papua New Guinean.
We need “mass propaganda” to spread and influence good morals and values.
We need to rebuild from within…we need mindset change.
We need to start beginning to raise and educate a thousand leaders for a thousand tribes.
The elections…this election has just triggered a massive Civil morally decayed unrest that cannot be contained easily as we are dealing with masses of troubled minds from years of progressive regressiveness.
We used to have corrupt candidates and corrupt Electerol officials…
This election the masses of voters have “evolved” to something else and even candidates and Electerol officers are baffled as to who is corrupt.
We have become a society gone dysfunctional and the elections was the trigger for nationwide social unrest.
I would like to advise our esteemed brothers and sisters using this platform to read with an open mind and appreciate the colossal nature of the structural damage done to the PNG economy and the urgent need for budget repair that awaits us all.
It will take another 50 years to clean this economic mess. This is not an hypothesis, it is real.
The only prosperous Island nation in the world that does not run a budget deficit is Singapore. This explains why they are ranked high on any development indices and enjoy a quality of life that is the envy of the world.
A nation that started with virtually nothing is now a global economic powerhouse. Just look at the capital valuations of all companies listed on the Singapore Stock Exchange. It demonstrates the gargantuan pull by Singapore on Foreign Direct Investment from all around the world.
There is a snippet posted on this forum with a video on the astute and a once in a generational leader called Lee Kwan Yew.
The blog offered by Kessy Sawang on the state of government Finance is NOT A JOKE. This is real and I hope sensible Papua New Guineans who are hoping to become MPs or just mere peripheral commentators realize the diabolical mess we are confronted with heading into the 2022 NGE.
Let me extrapolate on Kessy’s take and say without equivocation that Papua New Guineans have a high propensity to consume disposal income and possess a low net rating in personal savings. Coupled with the ravages of high inflation household income has been decimated right across the board.
No wonder wage concerns has propelled the Trade Union Congress to call for Ian Ling Stuckey’s sacking.
PNG wage earners will lose the value of their income and their personal savings if you print money. As you will appreciate, inflation will impose a tax on household savings destroying millions of lives.
The consequences of Budget deficits will only see prolonged monetary easing or the printing of artificial money to pay down debt and increase public expenditure.
The promise of such fictitious fiscal policy prescription pontificated by both O’Neill and Marape is that by increasing expenditure you expect to grow GDP, leading to increase employment and subsequently a corresponding increase in government revenues. This is called voodoo economics and it rarely works. It only leads to inflation and distorts price.
The illusion presented by government is that they will somehow pay down the debt and balance the budget according to an artificial timeline. That’s the genius of Ian Ling Stuckey and that will fail.
The Singapore model is proof positive that such a policy prescription is for fools and lunatics who live in utopia. The real beneficiaries of such a stupid approach in fiscal management is the thieves who thrive on procurement fraud, commissions and kick backs.
There is no time to take sides. Whether it is Peter O’Neill or James Marape’s mess we just have to deal with the repair work post 2022 NGE.
We just don’t have time to point fingers because they have dug a hole deeper than your usual 6 feet and forgot to throw down an escape ladder for us to get out. Now we face the real prospect of climbing out by stepping on the bodies of our own children to save ourselves.
The problems are real and whoever goes into Parliament will either fix the mess or excercebate the current economic mess. There is no magic wand we can wave for this present contagion to disappear unless we have some celestial insight to write all the wrongs of the past.
To my fellow brothers and sisters on the EB forum your endeavors to help arrest the deplorable state of government finance will be tested by the party you associate with or the personalities you gravitate towards.
The simple test for economic stability is when 1 kg rice is K1, Ox and Palm is K5, Lamb Flaps is K10 per kg and 1 litre cooking oil is K3. Better still, when university tuition fee is subsidized by 50% regardless of the prestigious nature of the discipline or course and when graduates don’t look for jobs but jobs go looking for them.
Furthermore, a stable economy is when the value of the kina is on par with the currencies of our major trading partners and its convertability is widely accepted will be an important marker.
The signs of a great economy is when our Papua New Guinean bricklayers, electricians, tile layers, builders, painters, plumbers, mechanics, engineers have a thriving SME sector, providing real employment and much needed liquidity into the economy.
By subsidising the high cost of retail banking placed upon our small businessmen and women and small depositors who can enjoy the real benefits of personal savings and secure cheaper bank loans without the high capital ratios currently imposed by the commercial banks.
We must look beyond the fraud presented by political parties and move beyond the cult worship of a politician masquerading as leader who promises everything but delivers nothing.
Leadership is accentuated by a correct vista, or a vision for a better future, and the moral courage to deliver on that promise regardless of the negative noise around which sometimes can be distracting.
PNG remains a construction of Australia and this baby was given to Somare to raise, nurture and wean into a strong vibrant adult. Yet it remains an infant in the simpler things of life – honesty, integrity, hardwork, love, compassion, respect and personal dignity.
PNG is turning out to be an abandoned child left destitute or an outcast for lack of a better word. It is encumbered on every Papua New Guinean and especially the EB community to rise up and restore this child to the vestige that once endeared Somare and his comrades to seek the fortunes of self determination and independence.
Eastern Highlands must once again reassert its pledge to this nation held so valiantly by the Late Grand Chief Sir Michael Thomas Somare and provide a fulcrum where good governance and empathy for all people must cancel out the insiduous disease of “mi kaikai pastaim na yu na meri pikinini blo yu bai kaikai bihain.”
May God bless Papua New Guinea and my personal congratulations and best wishes to all our brothers from Kassam Pass to Kuli Gap who have secured their endorsements from political parties for the 2022 NGE.
Prime Minister James Marape sells 51% plus stake idea in resource development projects to PNG stakeholders but deliberately hides the “UGLY” head of those true economic/ opportunity costs.
When James Marape became Prime Minister in May 2019, he made it abundantly clear in no uncertain terms that he will ensure that the 8 million shareholders of PNG take a good share of resource benefits.
Marape coming from a resource rich Province he has seen the plight of many of his people not benefiting from the uneven distribution of economic benefits and for him to make such a pronouncement is well founded.
With good intentions Marape made it clear that he wanted more that 51% plus stake of ownership for PNG. But unfortunately, there was one big problem with this vision.
The paradoxical effect with Marape’s dreams is that we have heard more motherhood statements that did not reflect an ounce of reality or for those businessman – it was far fetch from commercial success.
Let us take a look at the progress and status of major economic projects under Marape’s watch over the last 5 years.
1. Pogera
Shutting down an operating mine for 5 years to negotiate a deal that works entirely – lock, stock and barrel for the operator- Barrick, beats elementary logic. A complete bluff!
The end result of the New Pogera is as follows:
– The Arrangement is a Limited liability company and not an unincorporated JV
– Consequently, Barrick has full control over mine cash flows over the next 10 plus years while PNG Government and landowners can dream and expect windfalls (subject to cash flow availability/ prioritization)
– Foregoing 10 years’ worth of benefits on 36% over ownership by Kumul Mining Limited
– The benefits of 36% will vest and transfer to PNG in 10 years’ time. Barrick will keep all the benefit from now till 2034.
– The present value of cash flows from the Pogera mine over its life is only known to the SNT members. Very risky approach to taking a 10 year estimate. Consequently, the SNT supposed to know the enterprise value of New Pogera to work out the arrangement on the value of 36% and whether additional cash calls will be made by KML to pay for 36% shareholding in 10 years’ time.
– Barrick to use cash flows from 36% to start the mine and pay for operating costs.
– Landowners’ dividend is subject to availability of cash flows – no guarantee!
– Legacy tax issues in billions of Kina forgiven and forgone. The best sweet heart deal by any government.
2. PNG LNG Project
Papua New Guinea through Kumul Petroleum (KPHL) own 16% stake and indirectly through a shareholding in Oil Search (prior to merger with Santos) had interest of 29% which collectively in total amounted to an excess of 45% stake.
After the merger between OSL and Santos, Santos by itself now commands a staggering 45% stake (The largest) stake in PNG LNG – A high concentration holding there.
Santos and KPHL entered into a binding agreement for KPHL to acquire 2.6% of PNGLNG with a call option to acquire 2.4% in June 2024. The price that KPHL will pay is almost 3 times the value carried by Santos.
PM Marape mentioned during the merger announcement that a ‘National Interest Test’ must be satisfied before the nod is given for the merger.
Applying common sense, Marape would have asked Santos to sell and dilute at cost the excess stake it will have after merger with OSL and sell the excess to KPHL so it can hold up to 22.5% stake. Why now a tiny fraction at 3 times the cost? International bankers will be stupid enough to finance such transaction.
3. Papua LNG Project
By law the PNG government is entitled to hold up to 22.5% interest in this project. Investor confidence that gives the ultimate clout to mobilise resources and technology for this Papua LNG project was thrown into the toilet 5 years ago when Marape government decided to have in the agreement LNG trains on-site rather than piping to POM as agreed in the original agreement penned by former Prime Minister Peter O’Neil and Total.
We have heard that the FEED process on Papua LNG has now started. This is great news indeed! But news from the grapevine is that Marape does not want an expensive loan funding like the IPIC loans that ultimately turned into UBS loan and then now transformed into a ghost that is haunting Marape. Well for a guy who believes in angels and miracles, he should by now come to reality in that the mishandling of New Pogera LTD and consequent arrangements will not work on Papua LNG.
PNG’s debt to GDP ratio has gone over 60% and her borrowing capacity is on the tipping point. All SOEs are screaming in pain at the ICU ward under the guidance of Dr WD. Even KPHL is struggling to finance a binding offer of 2.6% share in PNGLNG.
So how will PNG fund its share of Papua LNG?
4. Wafi Golpu
Well at this juncture, it was reported that hundreds of millions if not billions have already been dashed out as grease money to MPG. As reported by the Sunday Bulletin, James Marape secured 55% benefits in whatever shape and form.
The Wafi Golpu is a project if approved and all parties have consensus over the mine operation arrangement, it can bring benefits straight away before the mining shovel scoops the 1st dust.
Apart from the contentious issues around deep sea mine tailings, PNG and other stakeholders are yet to know the legal structure of the Wafi Golpu.
Whether the mine will operate as an unincorporated Joint Venture or a Limited liability company (Like new Pogera) with share options issued to all parties and as desired, PNG takes 51% plus shares will be the final outcome from SNT deliberations.
Both structures have distinctive characteristics/ rules in law and operational arrangements to benefit LO and Government as a whole.
The landowners of Waffi Golpu and MPG MUST ensure that a thorough INDEPENDENT legal and financial “due diligence” is undertaken before accepting any arrangements crafted by PNGs most revered SNT members under the voice of Marape.
The New Pogera is a basket case and is a case in point for you all. Do not look too far.
5. Pasca offshore Gas
Twinza’s US$2.4 billion Pasca project is the first offshore gas project for PNG. Negotiations with PNG Government started and then stoped and went through the roller coaster since 2019.
The changes in the project agreement where at some point resulted in 2,400 changes made the negotiations quite lengthy. Not good for a nameplate project as such!
Had this project gone ahead in 2020, it would have been a consistent source of currency for PNG consequently alleviating part of the FX crisis.
The project was a lowest of all hanging fruits. Even the fish and sharks will agree to migrate away to ensure this project becomes a commercial success as the human landowners were far away in the land.
Finally in April 2023, after almost 4 years of negotiations, the green light was given for FEED to happen. Well done and this is a step in the right direction.
PNG government is still not sure of how it will secure funding to fund its share of the 22.5% stake let alone a struggling KPHL to secure funds from International Financiers for a 2.6% stake in PNGLNG.
Conclusion
In conclusion, I must say from the outset that it is no easy feat for PNG’s SNT team made up of seasoned public servants with their limited Board room experience and far from desirable commercial dynamics to pull through deals when global seasonal experts on negotiation are seated on the other side of the table.
I wish the SNT team all the best in ensuring that PNG takes it’s fair share of benefits from resource extraction.
On the periphery of discussing the above points, I must categorically point out that it has been almost 10 years since PNGLNG project started production and 50 plus years since resource exploitation began in PNG.
The most concerning thing is that PNG still does NOT have its SOVEREIGN WEALTH FUND to secure the future prosperity and security of future generations of PNG.
Olgeta samting em yumi laik lo kaikai tasol nau yet nau yet.
The way things are going, PNG seems to have entered into an era where we are either starting to take issues of national importance very seriously or this is the beginning of a very funny joke in the eyes of the international Community.
POSITION OF THE SPEAKER || by James Litai via his facebook post on the 29th of May 2019
The speaker may have some genuine grounds in refusing to vacate the chair because no provision in the constitution regarding dismissal and removal.
Please read this article before all muds are hurled at me. We are all united in the spirit to remove corruption and take back PNG.
The offices of the Speaker and the Deputy Speaker are established by section 107 and preceding subsections of the constitution. The functions of the Parliament Speaker and the Deputy Speaker are explicit in section 108.
There is no provisions regarding dismissal and removal of the Speaker and the Deputy Speaker. This means a Speaker is elected by Parliament during formation of government every after National Elections to remain on the chair for full term until the next election.
On the other hand, there is provision in the constitution to remove and dismiss from office a Prime Minister by section 142 subsection 5, and this applies to the Governor General by section 93.
The framers of the constitution may have forgotten, or maybe a deliberate to include clauses stipulating speakers removal and dismissal. Therefore, Pomat’s refusal to vacant the chair is genuine according to statutes.
Our important move in the VONC maybe stalled if Mr. Speaker runs to the Supreme Court to seek constitutional interpretation of this matter.
To my understanding, the Supreme Court refer to precedents reported in the PNG Law Reports to hand down Supreme Court Ruling (SCR) in such cases where there is no written law in place. If this case regarding the speaker becomes the first of its kind then whatever SCR will be the first precedent.
The constitution has been amended 22 times since independence to current. I would rather suggest to the Law Reform Commission and Office of the Legislative Council to recommend that the constitution be amended by Parliament after this VONC.
ALREADY TIRED OF UNNECESSARY DELAY AND ADJOURNMENT OF VONC..
[End of Litai’s post]
Yalo Hexton Kapili I wholeheartedly endorse this statement. I am bit compelled to add few words of my own here which am doing so as stated hereunder.
The election of the Speaker of Parliament is plainly stipulated in Section 107(2) of the Constitution where it says that the Speaker shall be elected by the Parliament by secret ballot in accordance with the Standing Orders of Parliament.
Clause 5 of the Standing Orders of Parliament succinctly provides the procedures for the election of Speaker by the Parliament in strict compliance with Schedule 1 of same.
The key word to emphasize and interpret is the word “Parliament”. Hence, what is the meaning of Parliament according to PNG context?
According to Section 3(1) of the Interpretation Act Chapter 2, it defines Parliament as the National Parliament established by Section 99 (structure of Government) of the Constitution.
According to Section 99 of the Constitution, Parliament means the 3 arms of the Government where the power, authority and jurisdiction of the people are vested and to be exercised by the National Government.
Subsection (3) of Section 99 clearly states the doctrine of separation of powers between the 3 arms of the Government which make the Parliament.
Well may as it be the law, I now crossed over to touch on what transpired in the Parliament today. The Executive arm of the Government today was led by a minority group. The Speaker was part of the Minority group. The minority group presided over the session of Parliament. The minority group had the upper hand in Parliament today.
The Majority group was overwhelming controlled and manipulated by the Minority group. The subjects of debate brought into Parliament by the majority group was done subject to the permit and control of the Minority group.
In that sense, the healthy democratic practice of parliamentary democracy where Majority rules has been given no meaning. The numerical strength of the Alternate Government team has no effect today.
Now to the issue of electing of Speaker by the Parliament. The Alternate Government team would have sought leave of Parliament to suspend the terms of the Standing Orders to proceed on with the election of a new Speaker without even notifying the incumbent Speaker of same as they have the numerical strength to do so. It was the Parliament that would have elected the new Speaker by secret ballot presided over by the Clerk of the Parliament as Chairman as provided for under Clause 5 of the Standing Orders of Parliament. The Alternate Government team failed in this area.
As a result of that failure, Parliament was brought into disgrace which eventually resulted in adjourning Parliament to tomorrow.
That’s my personal view relating to what transpired in the Parliament today. Apart from these, I wholeheartedly agree with my mentor James Litai here.
Thank you.
In Kamong We Trust and Live..!
[End of Yalo’s Posts]
Schedule 1.10 (3) that was quoted and intended to be exercised by the Alternative Government, pertinent to the motion on the 18th May 2019 at Parliament, is also attached below
Disclaimer: The opinions above represent the view of the original authors and not the editor of this blog. Mr James Litai is a seasoned Legal Studies educator and author and Yalo Kapili is a practicing lawyer.
Balcony Perspectives 