Land ownership in Papua New Guinea is in our hands

Statement by Rt. Hon. Sir Julius Chan GCMG KBE MP
Governor for New Ireland on May 14 2009 on his Motion on

“Resource Ownership and Benefits Sharing Arrangements”

Mr Speaker,

Honourable Members, I rise today to call on the government to restore justice and equity to the grassroots, landowning people of Papua New Guinea. I rise today to ask that we restructure the mining, oil and gas industries to provide a level playing field for the Provinces and the people, those who have suffered too many of the negative consequences of development and too little of the benefits.

For far too long the people of PNG have been victimized by both the State and outside mining companies. The State and the mining companies have gotten rich, but where have the benefits been for the people whose Mama Graun has made other rich?

The current Economic Philosophy of continued dominance and Paternalistic control by the State has not worked for the majority of the rural poor – namely the resource owners. The National goals and principles of our Constitutions have eroded all the rights to protection from unjust deprivation of property, equality of citizens, enforcement of guaranteed rights and freedoms, fair compensation, development principles and natural justice.

We must review and overhaul the development strategy and reform our vision to lift the majority of our people from the abyss of poverty to a level of opportunity by recognising their rights to benefit from their ancestral land, top, bottom and under water. The State reserving rights to compulsory acquire land, water and development for public interests.

The recently passed Land Registration (Customary Land) Amendment and Land Group Incorporation (Amendment) Bill 2009 should be implemented concurrently to fulfil the overall objectives of Benefits Sharing.

It is the only way to bridge the gap of “haves” and “have nots.” The Constitution and economic strategy as outlined in the Eight Points Aims have been sidelined for three decades, which has kept the rural poor with no infrastructure, hospitals, schools and basic necessities of life; whilst the urban population continues to expand, with income generated by tax revenues from coffee, cocoa, coconut, oil palm, timber, oil, mining and fisheries; in fact many illegal squatters in towns are guaranteed with jobs created from resource taxes to these town workers with adjusted minimum wages and with wealthy and highly paid public servants sitting powerfully in the Waigani Towers. No one really cares about the elderly, blind or disabled, weak and poor resource providers - because of their ignorance and cannot read to understand their constitutional rights.

My fellow Members, today I want to point out to you one of the key areas where government control has led to injustice and the exploitation of our people, and I want to propose how we can return the power to the people that they should never have lost.

In the Mining Act of 1992 the State unilaterally took control of the extractive resources industries, including minerals, oil and gas. They did this by taking control of the most important resource our people have – the land, the ground itself. This action violates the most basic principle of democracy and capitalism – ownership of the land by the people of the country.

Ownership of the land is also the heart of the societies and cultures that have existed in Papua New Guinea for thousands of years. But despite this, government passed the Mining Act 1992, and this single piece of legislation has done more than any other act to make a mockery of equity and justice in our country.

The Mining Act 1992 did two things. First, the National Government set itself up as the owner of all minerals on land or under the sea within the boundaries of the Independent State of Papua New Guinea.

Second, this means that the State, and specifically the Minister responsible for Mining, has the sole and incontestable authority to grant the right to explore and mine within the boundaries of the country. In effect, the National Government has set itself up as the sole and omnipotent owner of all minerals on land, under the land and under the sea. And for some reason no one seems to feel this is unusual or misdirected.

But if we look at the evidence it is clear that this is by no means the only way to approach the ownership of minerals. In the greatest industrial country on earth, the United States of America, this would be considered both laughable and dangerous. Americans are suspicious of giving the State too much power.

America is a federal system; the power of the State is balanced by the powers of the individual states. The individual states in America have the right to regulate the extraction of oil, gas and minerals. If the states are similar to the provinces in PNG, then the provinces should have much greater control over the extraction of minerals than they now have.

But even the individual states do not own the minerals. In America the final ownership of all minerals, oil and gas resides in the owner of the land. If an individual or group owns the land, they own all the minerals on or below it. Just drive through Los Angeles some day and look to the sides of the freeways.

There, all across the southwest part of the city are oil rigs, patiently pumping up and down, barrel after barrel of oil being pumped out of the ground, and half of these wells are literally in the backyards of family homes, each family the undisputed owner of the wealth beneath the ground they own. If the individual owner of land in the USA is similar to landowning groups in PNG, then the landowners, and not the State, would own all the minerals.

My fellow Members, the National Government of Waigani is too far removed from the people to take account of their real interests. Waigani does not “feel” the negative impacts that mining and other extractive industries have on the people who live where the extraction occurs. The big boys do not feel the pollution of the Fly River. The National Government does not feel the impact of the massive hole in Mama Graun left by Lihir.

The negative impacts are not limited to those on the environment. We all know the social disruption, the increase in alcoholism, increased youth crime, increased violence against women that comes with such large scale “development”. These are real and destructive effects, and they are felt on the ground, not in the offices in Waigani.

But, we accept these negative consequences because we think they will be outweighed by the positive benefits. But who benefits? Again, look at the evidence. PNG has had macroeconomic growth for decades. Overall we have made good progress in this regard. But that macroeconomic growth has not been translated into better lives for the people.

The present sharing of benefits is unjust and blatantly squandered by those in Waigani. Who do you think is paying for all the costs of embezzlement, misappropriations, thefts, Commissions of Inquiries and all the banquets and overseas travels, Christmas parties and excesses? The resource owners! Our nation’s wealth comes from rural resource owners and they remain the poorest of the poor.

That is why we must now revise our development strategies to divert wealth back to the landowners based on the principle of derivation, build up their capital and improve their capacities to be self reliant and with the little cash just enough to convert their small huts to something better for shelter and then prepare them for that rainy day, when the resources are dried up. That day will come.

I believe this motion is the most revolutionary change opening the gateway to the majority of our people – so they too can become partners with rights protected and become real citizens of the twenty-first (21st) Century. What I am prophesying is something I observed over the last twelve (12) years.

We must reverse 33 years of Independence, the locusts had eaten. We must shift the wealth of the nation from the government to the hands of the individual – the resource owners. The wealth of our nation must be in hands of our people. This truly then is the pinnacle of what democracy defines – the people’s government.

Mr. Speaker, the last Governor’s Conference held at Lombrum, Manus on 02nd June 2008, unanimously approved the Resolution No. 6 on Mining Benefits. The general consensus was for our Minister, Honourable Job Pomat would bring this for the National Government to analyse and produce a comprehensive review of the Mining Act 1992. This motion aims to assist our Minister to speed up that process. I hope the Parliament by this motion will push this to reality.

For many years there has been an imbalance in the distribution of benefits from major resource extraction activities - not only in Papua New Guinea but in the World. For too long those who own the land where resources are extracted have suffered far too many of the negative impacts and received far too few of the benefits of such activities.

Consider the following facts:

1. Major resource extraction activities such as oil, mining, timber exploitation and soon gas cause substantial negative impacts on the land and environment of the provinces in which those activities are carried out. If you go onto Google Earth and look at a satellite picture of Lihir, for example, you will see the damage done to Mama Graun.

Lihir is a gaping hole, a huge sore that has taken out the heart of the Island. Drillings have gone thousands of metres below sea levels which one day will become saltwater ponds destroying and salivating the rich food land.

2. Mining and related resource extraction activities also have substantial negative social and cultural consequences on both the landowners and on other people living in the provinces in which such activities are carried out. Families are broken up; youth turn to drugs and alcohol, violence against women increases, social systems begin to break down and cultures that have lasted for a thousand years come under increasing stress.

3. Most of the costs of addressing the serious environmental, social and cultural consequences of such activities fall on the local level governments, districts and provinces in which those activities occur. We at the provincial level still have to provide basic services, even when mining companies provide some assistance. For example, in New Ireland the province provides free and subsidized education, at a high cost to the people of the province.

4. These negative environmental, social and cultural consequences are long lasting and in many cases irreversible with negative consequences for generations into the future. These negative effects can never be reversed, and will affect our children and our children’s children.

5. The mining activities will only last for a limited time, sometimes for less than twenty years; others shorter. The benefits from the mining activities will only be available for this short period, while the negative effects will last far beyond the closing of the mine. Surely, Misima is an eye opener; Kainantu, Bougainville, Porgera and other monuments of proof.

6. Once the mine is closed the mining company can walk away, and the National Government no longer has to pay Special Support Grants or provide other support, but the province and the local level government will remain behind and will have the responsibility, in perpetuity, of taking care of the people who live there, providing services and infrastructure and other support even when there is no financial support from the mining operation to sustain the artificially introduced lifestyle.

And, my fellow Members, the State does not even have the honour to provide us with the pittance they promised us. In New Ireland, as well as in Enga, and Bougainville and across this great country, the State has simply ignored its legal obligations to provide these payments to the province and landowners.

Right now the National Government owes New Ireland well over K350 million in back payments under the legally binding Lihir Memorandum of Agreement for Special Support Grant, major infrastructure and Infrastructure Development Grants. This is the playing field the State insists we play the game on. Thanks to Grand Chief, our Prime Minister Somare – this level playing field has been graded after 15 years of three different governments.

Since the people of the province suffer the greatest negative impacts, and since they will realize the financial benefits of the mine for only a limited time, it is only fair that they receive a greater share of the benefits, while they last, than they do now. The main benefits received by the people now are:

1. Royalties which amount to only 2% of the f.o.b annual revenues of the resource extraction activity.

2. Special Support Grant’s which shamefully the National Government has now tried to reduce to only one-quarter of 1% of f.o.b annual revenues.

3. Some infrastructure benefits, but even these are usually delayed and do not provide full benefits to local people. In the case of Lihir no infrastructure under the terms and conditions has been actioned for fifteen (15) years. Admittedly, things are slowly coming to life after Prime Minister’s intervention.

This is a huge imbalance. Though the province and local level suffer all the negative impacts, they receive only about 2¼% of the financial benefits. This imbalance cannot be allowed to continue, especially since most of the negative impacts of the mine will last for generations. So, despite the fact the land belongs to Mama Graun and despite the fact that they feel the negative effects more than anyone else the people themselves receive an insultingly small amount of the financial benefits of the mine.

The people must benefit more and suffer less from the exploitation of their land. If they do not, then the people will refuse to allow further mining on their land. Why should they allow outsiders to come in and take their wealth for such a small payment? Government should protect the people. Instead it has been protecting the mining companies and sharing in their profits while denying those benefits to the people.

Government of the people must consult the Province, local government and landowners and not base its consent to pure economic and commercial decisions of foreign developers. They take and profit – we sip little and suffer big behind time. It is time and it is our joint responsibility to compel our government to become more the protector and servant of the people once again.

For these reasons and from the bad experiences learned, I propose that in each resource extraction project the mining/oil/gas company enters into several agreements, including a contract with the State and an agreement to pay royalties to the Province and other parties. The State then enters into additional agreements, usually including a Memorandum of Agreement with the other key partners, specifically the province, local level government and landowner groups affected.

The contract between the state and the mining company and the royalty agreement generally operate smoothly, with the mining company conveying corporate taxes, dividends and other payments directly to the State and, in the case of royalties, directly to the Province, Landowners and, in some cases, Local Level Governments.

However, implementation of the Memorandum of Agreement (or similar agreement) signed among the State, the province, the local level government and the landowners has been much less satisfactory. This MOA establishes a number of payments the State is liable to make to the other parties to the MOA.

These payments usually include a Special Support Grant (defined as a proportion of annual f.o.b. revenues from sales), identified infrastructure and/or social service projects and activities, and sometimes additional payments such as an Infrastructure Development Grant (for a Province in lieu of equity). While the State has almost always received the requisite payments from the mining companies, it has proven unreliable in transferring the agreed MOA payments to the Provinces, Local Level Governments and Landowners from the funds it receives from the mining companies.

To correct this situation the State will be removed as the intermediary and established as only one of a group of end-payees. Instead of the State, an independent statutory authority, such as the Mineral Resource Development Corporation, will be formally legislated as the first recipient of all payments for which the mining company is liable under the Mining Contract, including corporate tax, PAYG tax, dividends and any other payments due. The Statutory Body will then be legally responsible to distribute the funds it receives in the following way and in the following order:

Distribution 1: All funds owed to the province, LLG(s) and landowners under the MOA or similar agreement with the State.

Distribution 2: Fifty percent (50%) of all remaining funds are to be deposited into a Reserve Fund to be independently managed by a reputable financial institution outside Papua New Guinea for use for future generations.

Distribution 3: The remaining fifty percent (50%) of funds are to be transferred to the State on the condition that one third of that total is to be used for PIP (development) activities inside the province in which the resource extraction activity is occurring and two-thirds of the total is to be used for development activities in the rest of Papua New Guinea.

The province, LLGs and Landowners will continue to receive payments of royalties directly from the mining company, but the State will receive no funds directly from the company. The State will be the last of the payees to receive funds. Finally, the State must keep all funds received under mining or related agreements separate from all other income, and must dedicate those funds in the way outlined for development activities under the PIP program.

I call on all Members to help reverse this imbalance – let’s turn the tide and take a bold step forward in a new path, leading to a new level of opportunity for the majority of our rural population – And I hope we can stand together today to support this motion and get the government to move swiftly to introduce the changes proposed to revolutionize our economic vision providing a new beginning for greater participation of the majority of our people and resource owners.

*** I think Sir J is just hitting the nail right into the coffin. The government of Papua New Guinea is manipulating and twisting the laws to suit foreign companies and those in government because most of our folks in the villages are illiterate. I think the government is taking advantage of the scenario because nobody in the villages want to stand up and talk against the government for their rights under the law.

In the highlands of Papua New Guinea, there is a saying that, when a pig makes a noise, the owner quickly finds kaukau leaves to feed the pig. The noise is never heard again when the pig chews on the kaukau leaves. I think the same situation is happening here with the landowners of Papua New Guinea and their government.

This is an unfair battle with thegovernment and the landowners. As they say, the governement is for the people and by the people and represents the people. If this is the case, where does this play in Papua New Guinea?

The goverment is bounded by the laws of the land to protect the interests of the people and not be a puppet and dance to the music of those who want to dictate us from far off our shores. Therefore, I think that it is impreative for the government to consider the recommendations put forth by Sir J to level the playing field.

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