The Papua New Guinea Sustainable Development Programme Ltd, or SDP, says it has had to lay off workers and cancel major projects because of the financial problems it faces after the recent government take-over of the Ok Tedi mine.
Last month, the government passed legislation enabling it to take over the remaining 63 percent of shares in the copper and gold mine that it did not already hold.
These belonged to the SDP which was established primarily for the people of Western Province where Ok Tedi is located.
The SDP leadership accuses the state of stealing a lucrative mine and its associated $US1.4 billion Long Term Fund from the people of Western Province.
The Prime Minister Peter O'Neill says there's no reason for PNGSDP to close down its projects because it has enough money to continue running them and sufficient money in the Long Term Fund to finish all the projects.
But the SDP CEO David Sode says its available finances have dwindled and that the rules of the long term trust dictate that the funds can only be drawn down when the Ok Tedi mine operations cease. He spoke to Johnny Blades.
DAVID SODE: That hasn't happened yet and unless someone can convince me that's happened... Be my guest. But that hasn't happened yet, so I'm not about to push my board down to go to jail in Singapore for breaching trust rules that as long as there's mining and milling activity happening up at Ok Tedi, you can take the funds anyway. So whoever is advising the prime minister has got some advice which I don't have. The right thing to do now, Johnny, would be to say 'Well, mine life extension may go on for another 10, 20 years', which is futile to have this wealth sitting piling in foreign accounts. We should actually get on with the agenda development through the Western Province. So let's find a way to trigger those funds to do the big infrastructure stuff that we've been always talking and dreaming about. And so a sensible amendment to the trust rules [to get] the state and BHP to agree to would be just to say 'Forget this. Mine life is going to continue. Let's look at another way to draw down these funds and let's get cracking with the development agenda for the Western Province'. But for now I would need some expert advice, that obviously other people have, that tells me I can draw the 1.4 billion kina that I've saved over the last 10 years. Somebody else give it to me, because my lawyers aren't giving me that advice and I trust my lawyers.
JOHNNY BLADES: Essentially, though, isn't the government saying they want to get hold of that money and use it for development purposes and so forth because they're arguing it's their right as the custodians of the state and the Western Province?
DS: I guess that's what they're saying. The question is we're doing the same thing.
JB: O'Neill says there is too much influence by BHP in the whole arrangement. What do you say to that?
DS: I would very much encourage anybody to give me proof. It's just that we don't have any sense of that in the company here. We just don't have it. This is something that he harps about, which we have maintained... We have maintained all along that that influence is not evident here in our operations. BHP has never, ever influenced anything we've ever done in project development here.
JB: And talking of what you've done, there's a fair bit of work you've done in 5, 10 years in not just Western Province, but in the country, is that right?
DS: We have spent... Two thirds of the one third of the dividends we get go to the rest of Papua New Guinea. One third of the third goes to the rest of the country. We have spent 1.18 billion kina on projects all around the country.
JB: And now you've had to lay off 59 workers, I understand, because of these changes.
DS: We can't draw from the Long Term Fund. That is conclusive. Unless someone is going to give me advice that I can I wouldn't have shed the staff yesterday. And we cannot also draw from Ok Tedi anymore because that's been taken away from us. So that pool of development fund that we used to take from Ok Tedi to do this development work is evaporating fast, so we've had to make a call, the board has had to make a call. And the board has made the call that 97 projects would get culled. The total funding requirement for those 97 projects is 249 million, 250 million kina. In the Western Province alone we have half-finished projects worth 191.8 million kina. The rest of the country is not so bad. (Chuckles) It's bad, but it's not so bad. It's 57.5 million kina for the rest of the country. Those are unfinished projects, quarter finished, started. Those projects sit there because we just cannot finish them. We have tried our best. We have tried our darn best, given the limited resources we have, to finish them. And we have been finishing them. We have come to a point now where the till is running dry, and we have no income from Ok Tedi and we cannot access the Long Term Fund. So we have to make a call. And the only responsible call is take care of your staff, send them on their way. We're shedding some now, in a few weeks we're shedding some more, and in a month or two after we're shedding some more until this company is totally incapable of operating in Papua New Guinea.
JB: What kind of projects are they that have been cancelled or closed, stopped?
DS: Sadly, there's some very important ones that we were hoping to finish, especially in the Western Province. Daru has always been an epidemic point. Why, because it used to be the provincial headquarters and everybody came across to that island. And it never had any proper sewage, it never had any proper water... I mean, it had, but it's all broken down after many years of neglect by the government. So we walked in and decided 'Well, maybe we can co-fund and have a project together with government control, supervision'. So the Daru water treatment plant remains unfinished - 6.5 million kina short. I guess the saddest one is rubber. We have committed 38 million kina to spread out rubber through the Western Province - very strong in the south. We started planting, we started putting families on that system. That's all been canned. All around the country you've got aid posts, you have road systems, you have primary school projects, high school projects, health projects. It's just an amazing amount of projects around the country that have come to a grinding halt as of last week. At the same time, there's no point keeping the staff if their projects aren't finishing. That's why we've tried in a very, very sad way to let go of very, very highly skilled staff.