OPPOSITION’S ASSESSMENT/REPLY TO 2014 SUPPLEMENTARY BUDGET AND THE 2015 ANNUAL BUDGET DELIVERED BY: HONOURABLE DON POLYE, MP, CMG OPPOSITION’S ASSESSMENT/REPLY TO 2014 SUPPLEMENTARY BUDGET AND THE 2015 ANNUAL BUDGET Mr Speaker, Honourable Members of Parliament, Papua New Guineans, Public and Corporate citizens, I arise to be very explicit that both the 2014 Supplementary budget, and the 2015 annual budgets are nothing more than a, hoax; a deceitfully planned deception, for theft and corruption! Mr Speaker, As you know, the O’Neill-Dion Government’s presentation of the 2015 budget was most embarrassing and unprofessional! The amateurish presentation of the whole budget leaves much to be desired. As if having the Capital Investment book (Volume 3) thrown into our Office midnight Wednesday through “break and entry” was not enough blunder, the Opposition ends up with yet a new version of Treasurer’s speech booklet so different from the one presented during the Government’s half-cooked budget presentation. The conduct of this Government is a night-mare by good governance standards! Mr Speaker, What you have experienced, is an indication of an absolute decline in the standard of Parliament’s Legislative process. It illustrates to Honourable Members of the Honourable House and the people of PNG of a very weak and incompetent Government losing control of running the Nation! Mr Speaker, The appalling presentation of the budget is only a symptom of a more chronic problem, which the Opposition’s assessment of the budget will uncover! Mr Speaker, With your indulgence, I shall in brief, address the 2014 Supplementary Budget as to some of its details and the high degree of the lack of transparency in it. I will proceed onto the 2015 budget analysis as to the taxation measures, revenue forecasts, why a 2013, 2014 deficit budgets and the massive public debt and financing. I will highlight major discrepancies of the budget and conclude with discussing some of the very poor decisions of the O’Neill-Dion Government that is hurting Papua New Guineans and PNG’s economy. Mr Speaker, The most beloved hocus-pocus of all, is the idea that the O’Neill-Dion Government’s style of economic management and their money plans will rescue PNG from all her trouble – this year, (2014) total expenditure of Government grew massively over K16 billion beyond budgeted limits without creating shared wealth and prosperity neither creating sustainable economic growth, for Papua New Guineans, to be proud of. 2014 demonstrated how the O’Neil–Dion Government, or any irresponsible Government, can lose control of the economy. It is rare for the Governor of a country’s central bank to have to comment about concerns on extra-budgetary expenditure as was done in the latest Monetary Policy Statement. Mr Speaker, This year, Papua New Guineans have been hocussed and cheated by the Government in terms of the following five (5) areas: (i) Spending people’s money exorbitantly in few Centres and on non-priority areas. (ii) Blowing the people’s budget out of proportion by approximately K1.0 billion (K879.3m). (iii) Committing the people and the country to a huge debt of un-planned, unbudgeted K3 billion, very costly commercial loan raising the public debt levels to K17, 488.4 million. (iv) Breaking the country’s constitution and the laws and breaching the Government’s own macroeconomic policies. (v) Giving jobs and contracts to preferred Contractors and family businesses, hence depriving Papua New Guineans of shared wealth distribution and inclusive growth. Mr Speaker, The record set by this Government is very negative for PNG, thus, the nation will experience even more perilous times next year in 2015, in the medium term and in the long term, if this reckless behaviour continues. This Honourable House needs to scrutinise the credibility and microeconomic credentials of these two budgets impartially before a decision is made. We in this side of the House are of the firm view, that both budgets are a hoax, hocus-pocus budgets and must be directed by the honourable House for re-presentation! Mr Speaker, The O’Neill Government’s 2014 Supplementary and the 2015 Annual budgets is one of the greatest hoaxes in the history of PNG and should not be passed, needs to be re-done for the people! Mr Speaker, The Government’s releasing the “Public Investment Programme 2015-2019” (Volume 3), two (2) days after it had handed down its half budget on Tuesday, speaks volumes of the O’Neill Government’s incompetency and recklessness. Mr Speaker, I shall proceed to analyse the budget. (I) 2014 Supplementary Budget (K1,07Billion) Mr Speaker, Experts in the fields of financial and economic management and/or growth state four (4) fundamentally bad practices that must be avoided if one desires to succeed. These four (4) avoidables are: (a) A budget that is un-transparent, lacks growth strategy and opportune for corruption. (b) Spending outside of budget and incurring of unbudgeted expenditure. (c) Spending in less or non-priority areas that would not enable growth. (d) Incurring of debts beyond manageable levels, thus, killing growth and business. This Government has championed in doing all of the four (4) avoidables. Mr Speaker, The 2014 Supplementary budget could have been a windfall budget if the O’Neil-Dion Government did not incur K879.3 million un-budget expenditure, did not take a huge loan (K3 billion UBS loan) that squeezed out of State a massive K204.3 million and if the K600 m assets sale was done competently. The windfall would be approximately K500 million, as a result of the early sale of LNG gas and other revenues. (1) Unplanned/Unbudgeted Expenditure Mr Speaker, The unplanned expenditure of the O’Neill-Dion Government is reckless and unacceptable! It amounts to irresponsible management of the country’s economy! Certainly it appears that the so-called infrastructure works the funds were applied to out of budget expenditure, had not been scoped, costed or cost-benefit assessments done for economic viability as outlined in the 2014 budget. The targeted areas of unplanned expenditure certainly were not considered in the National Strategic Plan, Vision 2050, Medium Term Development Plan (MTDS) or within the armpit of Medium Term Debt and Fiscal strategies. It is shocking that the Government breaches its own macro-economic policies! Maybe because the Prime Minister O’Neill was never a part of a key portfolio in the then Somare-Polye, Somare-Temu, Somare-Marat and Somare- Baing governments who whole-heartedly framed and founded these macro-economic fundamental policies. No wonder, the Prime Minister does not understand and does not take ownership of prudent economic management! Mr Speaker, The Prime Minister, the CEO of the Nation cannot be trusted that this will not happen again! Mr Speaker, This budget blow-out has definitely affected the Government’s financing capacity. A good practice is, when a Government builds in a deficit in an annual budget for justifiable reasons like we did for 2013 and 2014, is to ensure before-hand that the level of annual deficit can be easily raised in the local economy through the Treasury bills or Inscribed Stock. (TB & IS). Mr Speaker, With the Prime Minister and his Government’s unplanned and reckless spending spree this year, the local capital market liquidity dried up and lacks capacity to buy any further Treasury bonds or Government Security. Therefore the demand for Treasury Bills and Inscribed Stock has reduced, which means that it is now becoming increasingly very expensive /costly to raise funds domestically. (All illustrated by Treasury in Volume 1). Mr Speaker, The consequence of that is that, the much needed infrastructure spending is delayed or aborted just like this Honourable House sees this Supplementary Appropriation do in slashing K1.07 billion from most priority areas to be transferred to un-priority areas spent by the Prime Minister and the Government on ad-hoc. Mr Speaker, With PNG’s local money market dried up and expensive; it would be difficult to assume that any 2015 annual budget programme would be capably financed properly. If the Government pursues other avenues like Sovereign bond issuance or resorting to commercial loans it would also be costly and risky. Mr Speaker, The Government’s talking of creating a Secondary and debt markets sounds like a good idea but it can only happen when real Papua New Guineans are given the opportunity to share the wealth and growth. At the present situation, the local Papua New Guinean entrepreneurs are not included in the construction boom. If the current trend continues, of the Prime Minister and his Government financing selected foreign Cronies/Contractors (only four (4) common ones – The Big 4), the dreams of inclusive growth would continue to remain dreams! Mr Speaker, Now turning to the figures; Papua New Guineans will find it absolutely startling that, more funds are pumped to Port Moresby City roads and again to the Pacific Games! The figures in total spent on these two areas so far add up approximately to over K2 billion! Mr Speaker, Let me refer you and Honourable House to the unbudgeted expenditure and its impacts very briefly: (II). The cuts and re-allocation impacts: Mr Speaker, The cuts of K1.07billion from the operational expenditure of K154m, capital projects of K472.0million and Trust Accounts of K444 million and transferred in the following manner is very, very questionable! Mr Speaker, (a) Firstly, the Prime Minister through the Supplementary Bill 2014 directs K250million to be transferred immediately to his Office. It says in the Bill; “… K250 million to be immediately transferred to the Department of Prime Minister and NEC (Division 203) and latter credited to the South Pacific Games Trust Account for Additional Expenditures.” (Supplementary Appropriation Bill, Schedule 1 Schedule 2). Mr Speaker, This is way far too much money for one individual, to control when the Prime Minister and his Office is not a bureaucratic and transparent implementing agent as such! So much money transferred away from the most suitable and various priority areas into the Control of Just One man, which is not a priority sector is alarming! This is improper and amounts to lack of transparency and bad governance. The Prime Minister’s Office does not have the capacity for check and balance, neither the competency to implement. The Chief Secretary’s Office is deliberately left out. The NEC Secretariat only administers Cabinet or the National Executive Council operations and nothing more! Mr Speaker, The Prime Minister’s Office is comprised of a political Chief of Staff and other Political Staff. Some key members of the Prime Minister’s Political Staff feature prominently as stars and champions in the famous shelved Finance Commission of Inquiry Report that reveals theft and abuse of million and billions of Public Taxpayers funds! Mr Speaker, This Honourable House must direct that these funds of K250 million be reverted back to the Joint Trust Account of Treasury, Finance and Planning to be drawn down with justified scope and costing of work. Mr Speaker, (2) National Capital Roads: allocated K75 m is a joke! What is the economic rate of return for instance, the Kookaburra by-pass or fly-over? The Fly-over in the city is only a “beautification project”, with no economic value built at massive over K270 million costs. It is sad to see more expenditure spent in a less priority area not prioritised in any of the macro-economic Policies of government, continue to consequently increase the State’s debt liability. Other city roads built or rebuilt at exorbitantly excessive costs are not priority roads compared to the Highlands Highway, the Sepik Highways, Southern Highlands-Central highway, East-West New Britain Highways, Buluminski High way, the Buka Ring roads and the other economic roads in PNG. Besides, The NCDC does have the capacity to fund these roads over time! Or is it a scam to make a few millions of kina concentrating billions of the people’s money in the city through a very few preferred contractors? Mr Speaker, The money be used to build the Central City! Mr Speaker, (3) PNG Power Policy allocation of K40 m also raises eyebrows! So here a massive K40 million will be spent to only develop a policy on Power Supply and Reliability. It’s not K400,00.00, nor K4 million, but K40 million for developing a piece of document made up of say 200 – 300 pages on supplying power and to stop black outs. Ridiculous! By the way, Mr Speaker, What is the story on the Prime Minister’s Israeli LR Company’s Gen-sets, which the PM has been dramatizing of its reliable Power Supply and solution? The nation was led to believe that the LR gen-sets were the panacea for PNG’s chronic power woes. The Prime Minister wrote and directed payment of K50 million in the first instance and then another K94 million additional at a total K144 million to purchase two old and used incompatible Gen-sets? It means by now as per the Prime Minister’s plans and direction of this huge amount of K144 M, the policy and other aspects of power should have been addressed! What is this allocation of another K40 million? Is this a scam??? Or is it an indication that the Prime Minister purchased gen-sets without a Government Policy in place like I have been arguing all along? It is an indication that this government is awakening to the fact a Power Policy is needed and PM’s ad-hoc spending of people’s money at will must stop. Mr Speaker, We say, only K2 m to K4 million is appropriate for developing a policy, hence the balance should be re-directed back to the Office of Higher Education and Trade Skills Scholarship TA Programme for our young. Mr Speaker, (4) Additional Interest Costs above 2014, consumes a massive K204.3million. The Government should be honest about this build-up of debt liability as a consequence of the K3 billion UBS loan! The need is there for the Prime Minister to tell the Nation through this Budget that K204.3 million is the interest payment for the K3 billion commercial loan (the bridging loan component!) Why hide the truth under disguised or vague prescriptions. The loan of K3 billion and its impacts are too significant to hide! Mr Speaker, (5) Supplementary Appropriation Bill 2014 Shows in Part I a figure of……K190, 700.00 in savings ---“to be used to offset further unexpected expenditure and maintain the Government’s fiscal parameters”. The other six (6) items in Part I add-up to K879.3 million and the same are shown in the preceding documents of the legislation including schedules 1, 2, 3, 4, 5, 6 and 7. But, Mr Speaker, This figure K190.7 million is a huge amount of money that needs to be scheduled transparently. Is this a deliberate cover-up? Is the Prime Minister, carefully doing creative accounting here, concealing the people’s money? It is not a surprise that the PM is hiding these funds in this manner so that the massive K190.7million could be used unplanned, and unrecorded like he has illustrated on numerous occasions in the past and this year, that he is more than capable to do? Mr Speaker, Is it carefully tucked away to pay more UBS loan liabilities, or for Pacific Games infrastructure or Pom roads; or maybe,….the old Marea House upgrade might need more funds for Mr… O’Neill… to apply? This massive amount of K190.7 million needs to be verified where it will be applied! Recklessly leaving such public funds aimlessly only is motivated by corrupt intent or encourages corruption! The Opposition recommends that it be re-directed back to the most priority areas of the 2014 budget, by the projects component budget. Or, Mr Speaker, It needs to be used for the development of Agriculture Commercialization Programme through the National Development Bank. Mr Speaker, (6) Keeping K494.3 million in Treasury and Finance (Miscellaneous) is a massive amount of funds controlled by a single Officer/Secretary will definitely lead to theft, abuse, and corruption. This practice of parking funds under only one Department Head or Minister is not transparent and erodes good governance! Mr Speaker, Say for instance, if the Prime Minister decides in a knee-jerk reaction or purportedly pre-planned decision to direct the Secretary of Treasury to execute spending without compliance to legal processes, it is very easy for the PM to do it. Now that funds are kept in one vote under one person who may be very close to the Prime Minister himself as against funds kept at various different votes and Departments. If the Prime Minister could by formal direction, get the Secretary of Treasury to transfer a K50m to Israeli bank from the Treasury through the Central Bank, the PM would love to deal with an enormous figure like K494.3m. The chances are high that even the Central Bank and other Commercial Banks could be used for money laundering involving State funds! This habit needs to be stopped! Mr Speaker, The Opposition is of the strongest position that, the funds be transferred to responsible Agents and Departments. Mr Speaker, (7) The Supplementary Budget/Appropriation Bill 2014 The Supplementary budget aims at enriching the few powerful and their cronies at the convenient disguise of City roads and 2015 South Pacific Games. The Supplementary budget illustrates an obvious lack of economic foresight and management. If the 2014 Supplementary Budget is implemented, it promotes corruption, erodes governance, and marginalizes/sabotages shared growth, shared prosperity and shared wealth. The Supplementary Appropriation Bill, 2014 lacks strategy for inclusive growth, doesn’t strengthen families nor alleviates people from poverty. It lacks transparency! Mr Speaker, I do not see my Honourable Colleagues of this House passing this Supplementary Appropriation Bill 2014. It promotes the personal interest of the Prime Minister, his cronies and the foreign contractors who are already feasting on exorbitant contract prices at the suffering of PNG businesses and contractors. Mr Speaker, This Supplementary Budget cannot be passed!! Mr Speaker, I shall continue to briefly discuss the 2015 budget… (II) 2015 BUDGET REPLY (1) GOVERNMENT TAXATION AND NON TAXATION MEASURES Mr Speaker, Let me commence with the Government’s 150% deduction for sponsorship and gifts in respect of the 2015 Pacific Games [Amendment of Section 69K of Income Tax Act. 1959]. The question is, - 150% of what? Is it K500, 000.00, or the total value of gift given? If it is 150% of K500,000.00, a simple arithmetic shows the following; 100%/100 of K500, 000.00 = K500, 000.00 + 50% = 50/100 x 500,000.00 = K250, 000.00 Total = K750, 000.00 Therefore the total deduction given in terms of tax is; K750, 000 + the gift of K500, 000.00 Total = K1, 250,000.00 = K1.25 million So Tax deductions will be done to the tune of K1.25 million! The relevant questions are: If Section 5 (3) says, “An amount by way of sponsorship (the value of which is not less than K500,000.00) of money or property (other than money), made by the tax payer in a year of income, in respect of the 2015 Pacific Games to PNG 2015 Pacific Games Limited, shall be an eligible amount”. Then, (i) Was it part of the 2014 Taxation Review recommendations that would have come to this Parliament based on a Collective professional study? I am reliably informed that it is not part of the taxation review recommendations. (ii) Nowhere in the bills does it say when the Commissioner General of the IRC should do evaluation of such gifts and property if other than money. Therefore why is there no clarification on this? It looks so suspicious as to the tax freedom benefits envisaged for a few corporate friends ahead of National interest. (iii) How does it help the 2015 Pacific Games and the state when millions of Kina which by market prices adequate enough to have completed all activities have already gone into the preparations for the games? Mr Speaker, Or is this 150% Tax Rebate yet another scam to continue to rip off from the State to enrich those few in power and their cronies and mates, partners etc? Mr Speaker, The Government on behalf of the State, has allocated over K1 billion (K1.189b) so far commencing 2013 budget, 2013 supplementary budget, 2014 budget and 2014 supplementary budgets for the Pacific games. And for even 2015 there is additional (K360 million in PM’s Dept.). Therefore, so much money to the tune of K1.7 billion to K2.0 billion will have been spent by March next year under pretext of 2015 Pacific Games. Mr Speaker, Don’t forget that so much tax holiday/freedom has been given for 2015 Pacific games/sports imports already! On top of all these massive expenditure, should this Honourable House allow to offer more favours and benefits to those already fat in the name of the South Pacific Games? The Opposition says NO! this Honourable House shall not allow abuse to continue! The Opposition calls on all Members of Parliament NOT to entertain the pack of unsubstantiated claims of the Prime Minister and his Sports Minister that they need to raise a K60million through the 150% Tax Rebate for the Pacific Games! Mr Speaker, What about the K250 million to be transferred immediately to the Prime Minister’s Office in the 2014 Supplementary Budget? What about K360 million for 2015 parked under the PM’s Office? What about K1.2 billion spent so far? Mr Speaker, If this deceitful 150% tax rebate benefits in tax deductions is for those Corporate Organizations that contribute as a gift valued over K500, 000.00, what does the Sports Minister and the Prime Minister plan for small Papua New Guinean SMEs and grass roots businesses who can’t afford this huge minimal allowable gift of K500, 000.00??? Where is fairness? Where is inclusive growth? Where is Shared Prosperity? Do small Papua New Guineans Small Medium Enterprises (SMEs) and little grassroots businesses benefit from this 150% tax rebate? Definitely NOT! – Many Papua New Guinean businesses cannot afford these huge K500, 000.00. 00 unless if you are part of the scam to benefit. All PNG businesses are excluded by this budget! Mr Speaker, The following are the Opposition’s options for Taxation to relieve grassroots employees. (2) Personal Income Tax PIT Mr Speaker, The Opposition will alternatively, ⇒ Increase Tax Free threshold from K10, 000.000 to K15, 000.00 to save PNG families K179.7m into their pockets! ⇒ Increase 30% marginal rate threshold from K18, 000.00 to K25, 000.00 to save K55.7m into the pockets of Papua New Guineans! ⇒ Increase top marginal rate threshold to K200, 000.00 so that the State makes a small K1.7 million. ⇒ All other taxes like the GST of 10% and Dependant Tax Rebates etc. remain. Mr Speaker, In this exercise, A total of - K179.7 - K 55.7 + K 1.7 - K237.1m loss to State’s revenue – but It is justifiable because it is wealth shared amongst ordinary Papua New Guineans; unlike 150% benefit intended for foreign Corporations and a few greedy Papua New Guineans. Mr Speaker, This Personal Income Tax charges proposed by the Opposition would improve PNG Working Family life and upgrade their incomes. (3) GOVERNMENT REVENUE FORECASTS Taxes on Income & Profits Review Forecast Mr Speaker, I now proceed to Government Revenue Forecasts. The only new Income will be from the Mining and Petroleum tax of close to K1.0 billion for 2015, especially from the LNG tax, and another K400m – K500m might come in as net LNG Dividends to state as we understand K650m LNG Dividend will be paid into the NPCP (to offset UBS K3 b loans). This approximated K1.4 billion new Income will apply positive pressure on job creation, leading to an increase in Personal Income Tax. Therefore, the Income and Profit Tax Revenue is projected at K8,352.3 million. Other areas like GST, international Trade and Non-Tax revenue are fairly moderate so the total is K13, 927.3 million. Therefore, total income, Mr Speaker, The total Tax Increase = K11, 257.8m Volume 2A Non-Tax = K 1,065.6m shows Grants = K 1,396.1 Infrastructure Tax Credit = K 207,8m Total Revenue and Grants = K13, 927.3 million The Opposition is of the position that the raising of K13,927.3 million is realistic and nothing more! But Mr Speaker, The total Expenditure = K16, 199.1 million So that: 2015 Deficit = K16, 199.1 K13, 927.3 K 2,271.8 million Mr Speaker, The Opposition is of the strongest position that the K2, 272 million deficit of 4.4% of GDP in 2015 is unnecessary and unaffordable and should not be allowed into the budget! The reasons being: (A) The 2015 projection of raising significant amount of money (K1.2b – 2.3b) K600million etc from selling LNG equity to landowners to meet K2, 272.0m deficit is very uncertain and speculative! Mr Speaker, There is a high chance that landowners will not want to pay for what is theirs and what they already own! The time has come for this Honourable House to support free-carry equity participation by our people! Look at what the O’Neill-Dion Government is doing – basically subtracting wealth from the people of PNG! This House must not allow this government to deprive landowners of their wealth! It is about time the O’Neill-Dion Government give significantly to the landowners. The people of Hela, the people of SHP, the people of Gulf Province, and the People of Central Province who own resources need not be treated with contempt, they own the wealth!. They know it is theirs! Mr Speaker, The Opposition supports free carry equity participation by our people! The Opposition condemns the Government’s plan to take equity away from the people – it is a repetition of another Ok Tedi case where the people of Western Province were promised over 60% equity by the Prime Minister but instead the Prime Minister appears to have lied to them… And if the landowners refuse paying for the equity they already have, the debt level of K2, 272 billion in 2015 will rise to beyond manageable levels just like we have experienced this year! Banking revenue on this strategy is speculative and uncertain! A responsible Government would not do that! (B) The Stock of over-all debt next year, 2015 will be: Much higher than this year’s at K14, 488.4 million. Mr Speaker, The O’Neill-Dion Government’s claim that the Public Debt level will be K14, 260.4million in 2015 is a cover up – an absolute falsehood! A plain lie! The truth is that in 2015 the total Public Debt will stand at K19, 760.4 million!!! Mr Speaker, Reasons why PNG should remain around 30% Public Debt to GDP are: ⇒ PNG is facing financing challenges ⇒ Increasing Interest Costs ⇒ PNG’s International Credit ratings is at risk of being down-graded. The huge debt of K19, 760.4m will be too difficult to raise domestically or globally. Therefore it is wise to avoid this 2015 Budget Deficit of this magnitude! Mr Speaker, The local capital market has capacity constraints with reduced demand for Government Security/bonds. This situation is affecting the Government’s ability to raise money easily. Global markets need to be studied before PNG issues sovereign bonds etc. to financing such deficit during these tough times. The K2.272 M deficit is an extra burden when public debt is already enormous! (C) There is no need for further economic stimulus package with a high degree of Debt. The major Global economies like the US, China and others including Australia are shifting from economic stimulus package strategy to creating tighter fiscal regime, to grow at sustainable levels, and to maintain stability. PNG needs to learn from these big players to avoid PNG going into recession and macro-economic instability. This means, Governments are reducing Expenditure, lowering their debts and focussing on building stronger financial markets and facilitating suitable fiscal and monetary policies. PNG needs to be prudent as to these dynamics at play in the major economies that partner and trade with PNG. (D) Why were 2013 and 2014 Deficit Budgets? Mr Speaker, I designed them so let me make a few remarks on them! The deficit budgets designed for 2013 and 2014 were to stimulate economic growth within the period the Construction phase of the LNG Project was winding down and speculated LNG Tax and Dividend Revenues were still on the way in 2015. The deficits of over K2.0 billion each were to cushion Papua New Guinean labour force coming out of the LNG construction phase. The deficit was for our young men and women who were employed but terminated after construction! It worked! The deficits were formulated to allow spin-off activities stimulated by the LNG project continued un-interrupted until the influx of LNG revenue in future would take over. The deficits were to sustain our SMEs and grass root businesses for a time only! The plan was to immediately return the budget back to a balance budget by 2018 without burdening the State with any further debt. The objective was that the level of debt in 2013 and 2014 was manageable so that when the LNG revenues of approximately K2 – K3 billion flowed in 2015, the programmes initiated by the deficit budgets would be sustained by the LNG proceeds. That meant that we project two years in advance to start to reduce deficit beginning 2015! Mr Speaker, But it is not the case here, the level of debt continues as this Government builds on more and more debts above manageable levels. The O’Neill-Dion government deliberately hides the real true levels of public debt. The Opposition will reveal the truth and condemn the chronic lies of the Prime Minister and Government! (E) MASSIVE DEBT LEVELS – Creative Accounting only conceals it! Mr Speaker, I will proceed onto PNG’s Public Debt levels. PNG’s Total Public Debt is at K14, 488.4m this year, 2014. The total Public Debt in 2013 was K11, 600.4m. The O’Neill-Dion Government projects a public debt at K14, 260.4m in 2015. The total public debt is simply calculated by adding the present stock of debt to the projected deficit in the annual budget. Therefore, the 2014 public debt was calculated by adding K11,600.4m together with the K2,353.0million (stimulus package deficit) in the 2014 budget gave a total K13,953.4million as the total public debt for 2014. Mr Speaker, But with the recent end of year exercises by government reigning in outside of 2014 budget expenditure by a supplementary budget has registered a reviewed 2014 public debt levels of K14,488.4million. This gives the view that the only reviewed increase is, K14, 488.4 - K13, 953.4 K 535.0m from the projected public debt levels at K13, 953.4 for this year. But definitely not so! Mr Speaker, Now applying the same method of calculating the 2015 total public debt gives the following real picture! The next year, 2015 public debt is given by the following calculations: K14, 488.4m (2014 public debt) plus the K2, 272.0million 2015 deficit (4.4%) gives K16, 760.4million! Definitely NOT K14, 260.0million as claimed by this government! Mr Speaker, Therefore this hoax, this deception that public debt level will decrease in 2015 is dangerous to PNG’s economic management; it’s an absolute lie and must be revealed! One can easily tell that it is an example of The Prime Minister’s creative accounting! Mr Speaker, So with a K16, 760.4million PNG’s Public debt gives the debt to GDP ratio to be; K16, 760.4/K51, 418 x 100% = 32.6%. So it is not 27.8% as claimed by this cheating, lying, deceitful Government! Mr Speaker, Additionally, do you remember the K3 billion UBS loan??? Looking through the budget 2015 papers simply shows no mention of it. The Public Debt Section of the 2015 budget Volume 1 – Economic & Development Policies does not even mention it! What happened? Did any of the State Owned Entities absorb it? No! The SOEs cannot carry this loan because; they are basically bankrupt just as the budget books indicate. The balance books of the SOEs cannot support and repay the loan. Can NPCP take responsibility! No it can’t because, it has not even started any formal business yet! What the Government have done is, directed LNG proceeds into the NPCP to cunningly keep monies there for the repayment of the K3 billion loan. Once NPCP has been used, it will be dumped to join its sister entities who have been bone cleaned in the name of dividends by the Government. Mr Speaker, The loan was the most outrageously economically destructive loan ever undertaken; hence definitely its negative impact on the loan cannot be understated or belittled. Not to mention it at all to this Honourable House is the biggest fraud ever when this matter has attracted so much controversy! Mr Speaker, Nonetheless, the Opposition received yesterday afternoon a completely new Treasurer’s speech booklet that had a paragraph on the UBS K3 billion loan inserted on page 4. What is greatly alarming is that the newly inserted paragraph is false in that no supplementary budget passed this UBS loan under Section 209 of the Constitution prior to sanctioning its execution by Parliament. Is it a deliberate lie to mislead the leadership tribunal, Prime Minister? Mr Speaker, Therefore, the real total public debt is K16, 760.4m plus K3, 000.0m equals K19, 760.4m, the public debt will be in 2015! Therefore PNG’s debt to GDP ratio in 2015 = K19, 760.4/K51, 418 x 100% = 38.43% and not 27.8% as claimed! Mr Speaker, The Government’s Debt Sustainability measures set out in 2014 budget were: 2013 2014 2015 2016 2917 2918 Debt to GDP 33.5% 35.2% 29.3% 29.9% 29.7% 29.7% Interest Cost to Govt. Revenue 6.1% 7.2% 8.0% 8.0% 8.0% 8.1% 2014 Foreign Debt 24.6% 25.1% 25.8% 25.7% 25.2% 25.8% 2015 Foreign Debt K40m 25.5% 25.7% 31.8% 33.7% 37.7% 38.6% The Government’s Debt Sustainability measures given on page 95 of the Volume 1, Economic and Development Policies Book is misleading and fraudulent! Mr Speaker, Note! The table on page 95, Volume 1, does not state what interest cost will be to the Government at these measures! Mr Speaker, The Government claiming to bring this budget back to a balanced budget in 2017/2018 in this budget is hogwash, and wishful thinking! It practically will not be possible! The economy will spiral out of control if this Honourable House does not act appropriately to stop this madness of this Government! Mr Speaker, We, the Opposition, appeal to Honourable Members of Parliament to realize that through creative accounting and deceit, this budget was designed to give a positive impression of the country’s economy but realistically it is not positive, it is glaringly negative – it’s a deception. Next few years will see struggle in the economy if this House does not act responsibly now in this session!!! It is one of the unprecedented political hoaxes of our time! This budget is false! It is our duty, Honourable Members, to observe diligently and not allow ourselves fooled and misled. Mr Speaker, Let me take your attention to the total Central Government expenditure payments for 2015 in Volume One(1), Table 9, page 17 to show that total payments next year will be K24,998.0million. For the same thing, the Appropriation (General Public Services Expenditure 2015) Bill 2014 seeks to appropriate a sum of K24,487,983.900 for expenditure for year ending 31 December, 2015 as required under Section 209 (2) (c) of the Constitution as amended. (The difference is K510 million but I shall leave this to later in the discussion). Mr Speaker, But for now, whatever the real figure is, the total amortization has been increased from K5, 536.8M in 2014 to K8, 794.5m next year, an increase of K3, 257.7million. The total amortization for 2013 was K4, 361.0 million which means the 2014 increase was only K1, 175.8million. Comparatively between 2013, 2014 and 2015, this massive K3,257.7million increased amortization comes from the K3 billion UBS loan, which in overall significantly affects financing of the 2015 budget. The Government will need to raise a total K24, 487,985.9 as per the 2015 Appropriation Bill 2014 when PNG’s debt market will face constraints with reduced investor demand. Mr Speaker, What Honourable Members of Parliament are made to believe here in these budget papers is not true! This budget must be blocked and redone! It is very sad…that, the Government mandated to serve its 8 million people with honesty and integrity is shamelessly cheating its people, only incurring massive unmanageable debts and not revealing the actual pubic debt levels and how bad they are - and continuously failing to tell the simple truth! (F) BUDGET FIGURE DISCREPANCIES Mr Speaker, The 2015 Budget books, the Minister’s statement and the Appropriation (General Public Services Expenditure 2015) Bill 2014, give very conflicting or inconsistent figures. For instance, firstly the Minister’s statement on page 3, states additional unbudgeted expenditure was K897 million while, the Appropriation Bills add up to K879.3m. The Difference in the figures here is, K897 – K879.3 = K17.7 million. Secondly, the total operational expenditure formerly the Recurrent Component as per the Appropriation Bills is K17, 502.4 million; whilst the Minister’s statement gives K9, 213.5 million. The total difference between these two figures is; K17, 502.4 – K9, 213.5 = K8, 289.0m. This is very confusing as both figures relate to the same thing, namely “Operational Expenditure”, for the same year, “2015” with a significant difference, K8, 289m. Thirdly, the total payment, 2015 registered in the Volume 1, Table 9, page 17 is K24, 998.0 million, whilst, the Appropriation Bill gives a figure to the tune of K24, 488.1 million whilst the Ministerial speech mentions nothing on it. The difference is K510.0 million. Mr Speaker, The above three different contrasting figures of this budget illustrates very serious flaws. Here before this Honourable House is the Government budget with such flaws that are glaring and too profound to be overlooked or be accepted as typing errors or genuine mistakes. It amounts to recklessness, incompetency and offends the intelligence of the Chair, the House and the people of this country! These discrepancies cannot be forgiven! Mr Speaker, The budget cannot be allowed to be passed in this form. It definitely must be re-done properly. (G) VERY POOR ECONOMIC AND POLITICAL DECISIONS! Mr Speaker, The Opposition is concerned of many worrying economic and political developments in PNG under the O’Neill-Dion Government. Some of the most noticeable factors are the following: • The Government has been shifting its focus for providing services to direct involvement in risky business ventures definitely has affected the Nation’s economic soundness. The Opposition is of the strongest policy view that the Government should concentrate on what it does best – health, education, law and order, infrastructure – and have the private sector do what it does best! The people of PNG will benefit from jobs created by the private sector, as well as taxes the private sector should pay. Mr Speaker, Recent examples of moving across this line include the following: (i) Funding of Oil Search shares. This single handed decision of Prime Minister, Peter O’Neill directly affects the budget through both building overall PNG indebtedness (as illustrated earlier) as well as diverting mineral revenues towards repaying a loan rather than going into investing our children’s future through health, education, infrastructure and law and order. Mr Speaker, If the interest payment this year is K204 million for the UBS loan what and where is the dividend payment from Oil Search to the State for the 10.1% shares owned by the State? If there is a dividend income, the PM must indicate where we find that in the budget! The Government’s selling of 4.6% of LNG shares to the Hela People and other landowners is a convenient disguise to bail himself out of a mess he created but in doing so he makes the people of Hela and other landowners be punished once again for his sins. The Opposition view is that the 10.1% of Oil Search shares be re-sold and proceeds be used to free up the country of this huge debt liability. Mr Speaker, (ii) Second is the Ok Tedi take-over - This has affected business confidence, opened the people of PNG to the risk of legal action, and hurt the people of Western Province who still deal with the environmental implication of the mine. Ok Tedi is currently in an international arbitration over the ownership issue so that the decision of the Prime Minister as Minister responsible has not been successful at all. The projected revenue of K190 million from Ok Tedi mine might not come into State coffers if hampered by such arbitration. Mr Speaker, (iii) International Petroleum Investment Company (IPIC) – the O’Neill-Dion Government’s mishandling of a case very recently has led the state to a loss of another US$300 million (K600M to K700M) to IPIC. How did Mr O’Neill and his team lose this case. Mr Speaker, Or is it another trick? Like the UBS Loan, where Government cheques had already been raised in advance under the convenient disguise that the IPIC shares would be redeemed? Is it another of such deals when PM although, apparently, knew that reducing the 15% shares from IPIC was not possible under the existing agreement, but nonetheless proceeded to raise cheques to satisfy his ulterior motives of the 10.1% Oil Search Shares. The loss of US$300 million needs to be explained to the people of PNG by the Prime Minister! Mr Speaker, (iv) The O’Neill-Dion Government thinks the kina/US dollar exchange rate band is helpful but it is not! It is hurting PNG’s rural exporters. Mr Speaker, The artificial lifting of the kina/US exchange rate has dropped the income of all rural exporters by nearly 15%! Mr Speaker, Farmers know that when they when they go to the factory gates to sell their coffee or cocoa that they received 15% less per kilo on the 5th June because of this decision. This is estimated to have moved 130, 000 people growing coffee in rural PNG below the poverty line according to World Bank estimates. Mr Speaker, The Opposition would like to have this temporary fixing of the Kina/US dollar exchange rate removed and leave it to the market forces. Mr Speaker, By discouraging exports, it also has undermined PNG’s international competitiveness. PNG will host APEC in 2018 when current economic policies are stopping PNG’s true integration into the region. Mr Speaker, The opportunities of APEC are not the glories of hosting an international summit. Rather, they are the opportunities presented to rural farmers and PNG businesses to export more, and for PNG consumers to benefit from cheaper imports. The banding of the exchange rate is counter-acting against our local export industry badly! Mr Speaker, The State Owned Entities (SOEs) appear to be bled to death! The Prime Minister has squeezed so much “dividend” out of all these entities and has returned no significant budgetary allocations to them. The majority of these entities have been forced to declare dividends from their operational/investment funds or the 2014 Supplementary Budget and 2015 Budget have been funded from so-called dividends. The Opposition hopes that the Boards and Managements of these SOEs have not breached any laws in pleasing the Government in providing so-called dividends only to quench a desperate finance situation! Mr Speaker, The Opposition is concerned that healthy micro-economic reforms cannot occur with ample funding. These entities need to be re-structured and re-positioned for asset sale, or improvement performance. To do this, they need money! The O’Neill-Dion Government’s actions actually kills them! Mr Speaker, This Government has failed to collect K600M from asset sales because it failed to raise the value of those assets! Mr Speaker, Talking of asset sales, when will an O’Neill Government earlier decision to sell the very expensive Government Falcon Jet take place? The falcon jet should be sold immediately to slash further operational costs. Mr Speaker, The PM should avoid using both the falcon jet and his own “Southern Highlands” company South West Air at the same time as it’s very expensive. Maybe the PM has the full authority to put the Southern Highlands people’s company on full hire for the State to his South-West Air planes, but he should immediately sell the Falcon Jet…? Mr Speaker, The preparation for the 2018 APEC meeting is important for the country but the Government is sleeping! The Opposition is of the view that PNG needs both dedicated Ministerial and technocratic teams to start preparations for the APEC Summit in 2018. APEC is a huge international conference that requires new cultural and rational high level thinking so that the preparations should be well underway now. Mr Speaker, The Opposition’s position on the SWF and the EITI is to ensure that these two institutions complement one another. Mr Speaker, The Opposition is of the view that the originality of the SWF be maintained and the remaining work on EITI is expedited. It is a concern that the Government is delaying the flow of LNG dividends into the SWF to 2016. The SWF should be fully operational in 2015! Mr Speaker, The Opposition’s final concern is the Government’s lack of commitment to the Manus Assylum Seekers Programme. The Opposition states that PNG and Australia have an Agreement to have ten(10) refugees processed to become citizens of PNG per week. The progress on PNG appears to be slow and would lead to a diplomatic embarrassment with Australia who is very close in Partnership to PNG. The Prime Minister needs to live up to his word with foreign governments or else it might become another international blunder like this House has experienced in the 2015 budget presentation! Mr Speaker, The Government is in direct contradiction to its budget motto “Building our Nation & Providing Opportunities for our People” through the allocation of the mere K730.8m to the Economic Sector, a rise of only 5.9% or K40.8m from 2014. It is very concerning to see the Sector directly responsible for job creation and income earning, boasting rural SME businesses and empowering mums and dads participation in economic growth receiving low priority. How do we encourage economic growth then? The massive increase of about 50.1% from 2014 in the Debt Servicing Component of K1,130m reveals the true focus/intent of the 2015 budget. This budget has been cunningly designed to reward corporate friends of the Government with the meat while sadly leaving the bones to the people of Papua New Guinea. This effectively cuts of opportunities for Women and Youth SMEs, Agriculture and Tourism Industries to flourish. Mr Speaker, • These are two budgets that place enormous – over K1.5 – K2 billion into the sole control of the Prime Minister Hon Peter O’Neill and the Secretary for Treasury. • Here is a budget that conceals the real truth of the Country’s total Public Debt that the O’Neill-Dion Government has committed the State into! • This budget gives 150% tax rebates to cronies at the suffering of the majority of small entrepreneurs, businesses and grassroots! • This budget takes the landowners wealth away only to pay off unproductive loans to the State! • Here is a budget full of glaring discrepancies and inconsistencies in figures and in the details! • This budget kills the SOEs and spends resources in less or non-priority areas! • This budget is so un-transparent that so many funds placed under a few powerful areas of control. Mr Speaker, • This is a budget that doesn’t promote inclusive growth, shared prosperity and shared wealth, for women, children, and youth. • Here is a budget that kills the survival and operations of LLGs in PNG by slashing K400, 000 from them. • The public service modernisation and human resource training certainly do not have a strategic place in the budget! Mr Speaker, When I was on the other side of the House, presenting the 2014 budget, remember, I gave the analogy of the father planting the karuka tree knowing fully well that he would not benefit but was planting for his children for the many years to come?? I said that confidently, as the country did have and still does have very sound macroeconomic policies like the Vision 2050, NDP, MTDS, MTFS and MTDMS. I was also confident that any one in Government would not breach our own Laws including the Constitution. I also said it with funds been allocated equitably to all Sectors including Agriculture Commercialization Programme. Mr Speaker, I was fully conscious of the need for the Executive Government to fully comply to the above Policies, the Constitution, the Organic Laws, Acts of Parliament and Legislations. Now I see in this budget, all the karuka trees planted in the last 10 years of strong fiscal discipline have been over harvested and even the trees cut down and even the new young karuka shoots have been destroyed sucking every juice out of it! This budget does NOT plant any new trees. It only harvests what was planted by others in the past. Even the DSIP, PSIP, LLGSIP and other benefits to individual districts are subject to the larger economy of this Nation. I don’t see these programmes sustained in the next ten years, if this reckless attitude continues. These budgets meet all the criteria for rejection by this Honourable House. These hoax budgets are deceptive and misleading money plans and are bad for PNG and should NOT be passed! Mr Speaker, If Honourable Members of Parliament do not understand the technical details and the economic perspective of both budgets the Opposition has given, then common sense and moral conscience will prevail in them. For instance, if the Prime Minister is putting K1.5 billion over into Prime Minister’s Office, it is wrong! If the figures do not add up, then it’s wrong! If the true level of Public Debt has been concealed in this budget and falsified details have been given, then it’s wrong! Or the easiest is, if important budget documents have not been properly prepared for the budget session, when budget is the most important strategy of any Government, than the clear conscience will come into play immediately as there is something wrong. As the saying goes, there is no smoke without fire. Mr Speaker, I call on all Members of Parliament to take heed that if these budgets are passed, then there’s no use of MPs becoming wise after the destruction has been made to the economy. Let’s be wise and prevent economic destruction while we can! This budget must not be accepted! This budget must be rejected! Thank you, Mr Speaker!
Posted on: Tue, 25 Nov 2014 10:19:40 +0000
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