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Benefits of Contract Transparency

Contract Transparency or disclosure of project agreements has had positive influence in other EITI implementing countries.

Head of PNGEITI National Secretariat Mr. Lucas Alkan said this when announcing that Papua New Guinea will be required to publicly disclose project agreements and contracts by the year 2021.

“Disclosure of project agreements has had positive influence in other EITI countries because it allowed the public to compare different project agreements and this created a level playing field for resource developers, created competition and enabled governments to negotiate better deals for their resource wealth, therefore, PNG stands to benefit by doing the same,” he said.

Mr Alkan pointed out that several key benefits could be derived by the landowners, the government and the citizens for disclosing agreements, and these included:

  • A better understanding by all parties in the project agreements on the terms on which oil, gas and mining activities are extracted and sold;
  • A better understanding on how revenue flows (royalties, dividends and taxes) to the PNG government, provincial government, local level government and land owners and communities affected by extractive operations;
  • Enables the government and its citizens to see what subsidies and tax incentives are awarded to industry companies or resource developers; and
  • A better understanding on the obligations that the project developers are required to meet to protect the impacted communities, the environment impacts and make social payments or provide local employment. Knowing all these in the contracts or project agreements enable citizens to ensure that the developer complies with these obligations.

Mr. Alkan said that for resource developers, disclosing the terms of contracts supports open, fact-based dialogue that can help build trust, reduce conflict and reinforce a company’s social obligation to operate in the country.

“Disclosure of project agreements makes it easier for companies to demonstrate that they are complying with their financial and social obligations and also helps them to address reputational risks.

Mr Alkan added that for the benefit of the Government, the disclosure of contracts incentivises government officials to arrange fair contracts and it prevents them from concluding agreements that are disadvantageous to their citizens and the country.

“Contracts and project agreements that are disclosed can be more easily enforced because relevant agencies and departments within the government become more aware of the contract terms and can collaborate more effectively to ensure that contract terms are maintained.

“Public disclosure of contracts allows the citizens to understand the interested parties’ roles and responsibilities in a project. It also enables people to see how much money (in the form of taxes, royalties, dividends, etc) will flow from the projects to the relevant government entities, and to hold them to account for their use.

Mr. Alkan is calling on all responsible government entities involved in the negotiation processes to ensure that all new projects now in the pipeline should start making provisions for contract transparency because PNG as an EITI implementing country will need to fulfil this requirement. The new resource projects now in the pipeline include the:

  • Frieda River copper and gold project;
  • Woodlark Gold project;
  • Wafi-Golpu Gold project;
  • Papua LNG Project;
  • P’nyang; and
  • Pasca A Petroleum Project.

Mr. Alkan added that the Government will need to ensure that contract disclosure provisions must be built into the project agreements for the above 6 multi-billion-kina projects worth over K130 billion in the pipeline now to be developed.

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