People in glass houses…: A timely reminder by Hon Mao Zeming

By PNG Echo.

The Hon. Mao Zeming, MP, the Deputy Leader of the People’s National Congress Party (PNC) and Minister for Fisheries and Marine Resources, has questioned the motives of one of the Grand Chief, Sir Michael Somare’s, children – the former MP for Angoram and Minister for State Owned Enterprises under his father’s government, Arthur Somare.

 

While the cameras roll,

said the Hon Zeming, commenting on Somare Junior’s reported intention to stand outside ASC in Australia,

I wonder how eager he will be to discuss his own ministerial record and the charges that were leveled against him in his own political career.

The sins of the son

All 105 of them apparently.

They are charges that were lodged by the Public Prosecutor with the Leadership Tribunal for misconduct in office against Somare Junior in 2011.

However, in a stroke of good luck for him (although not for the unfortunate member of the three-man bench) Somare came out of it unscathed when the Leadership Tribunal was adjourned indefinitely following the passing of a member presiding over the hearing.  And with the loss of his seat in 2012 election, it was thought he’d largely disappeared into oblivion.

But lately, Arthur Somare has risen to prominence as the negotiator for the landowners in the LNG deal and has been eager to defend himself against the charge Prime Minister O’Neill leveled when he said that the UBS loan was necessary to sort out the mess that was left by the previous government – which was down to Arthur really.

No, not me, cried Arthur- don’t blame me. Not him, said a commentary by the loquacious Bryan Kramer – the two things are totally different – nothing to do with each other.

Not convinced, I went looking for more information.

Sir Mekere Morauta speaks

And I found plenty.

I happened on an article – written by Sir Mekere Morauta in 2011 after inheriting the IPBC from Somare Junior during the O’Neill/Namah government.  He wasn’t impressed with his inheritance.

For while Morauta may now be in cahoots with Sir Michael Somare – and by extension his children, he was once one of their most fierce critics. He had this to say on taking over what he described as “a mess’ from Arthur Somare in an article entitled:

The theft and waste of money in Papua New Guinea’s Public Enterprises [some edited highlights]

Morauta begins by explaining:

When the O’Neill-Namah Government took over from the Somare regime in early August, I was given the task of sorting out the mess which had been created among all of the state owned enterprises by the former Minister for Public Enterprises, the (currently suspended) Member for Angoram, Arthur Somare.

He goes on to say:

It seems that the IPBC and its SOEs were seen as the Somare family “honey pot”,… As Minister, Arthur Somare regarded the SOEs as toys to be owned to glorify his image, not to provide services to people.

Harsh words indeed!

Oil Search shares

As the topic of the moment is the UBS loan and the deal that preceded it struck by Somare Junior that he is defending vigorously as sound, Sir Mekere Morauta’s words are interesing.

It seems he is not in agreement with Somare. He had this to say (and I quote the section in its entirety.)

The largest investment decision made by Government ever in PNG was the investment of public money in the PNG LNG project.  This required the borrowing of 1.68 billion Australian dollars which then Minister Somare and the then IPBC Managing Director arranged through the little-known IPIC, a fund in the Middle Eastern oil state of Abu Dhabi.  We have had to investigate the circumstances of this loan, because there is now a 900 million Kina shortfall in the loan which the current Government will have to find.

It is still not clear exactly why this very large shortfall has occurred, but some of the decisions taken in relation to this loan and administration of the funds seem very hard to explain, or were based on bad advice, but they certainly produced disastrous results.  Without going into details, it seems very strange, and an appalling lapse of judgment on the part of Arthur Somare and Glenn Blake, to agree to repay the loan in full in March 2014, before the LNG project starts producing significant revenue.  In other words, we need to repay this very large loan before we have an income stream from the project for which the loan was taken out.  To agree to this was completely stupid, which raises many questions about the motives of the borrowers.

Would it not have been more sensible to take out the loan for a longer period, which would have enabled the loan repayments to have been made after the project was in full production?  And why was the loan money drawn down (and earning little interest) months before it was required for the LNG project?  That issue alone guaranteed there would be a significant shortfall which would have to be made up.   Also, very large foreign exchange losses were incurred when the loan money was all converted to one currency without any currency hedging in place, a normal precaution for such large financial transactions.

All in all, the initial development of this loan, and its administration since being taken out in 2009, have been characterised by very poor decision making which has resulted in a loss to the Government, to the people of Papua New Guinea, of 900 million Kina.  That money could have paid for a lot of schools, hospitals and roads, but is now needed just to repay the loan arranged by Arthur Somare.

It does indeed raise many questions about the motives of the borrowers, Sir Mekere, especially as you pointed out…

 …family members and cronies [were] being appointed to the boards of SOEs and IPBC…  In the midst of this [mismanagement], the family financial adviser was appointed as Managing Director of IPBC (no conflict of interest was apparently noticed) and even the Somare family legal adviser was given chairmanship of IPBC for a period.”

…and that’s not all

In the article, Morauta proceeds to criticise the performance of PNG Ports and PNG Power which he described as “struggling. Of Bmobile he said:

It s inexplicable why anyone with the interests of the public of PNG in mind would (twice) sign such unfair and biased shareholder agreements, so plainly detrimental to this nation’s interests, as occurred with the former Managing Director of the IPBC, in conjunction with the then Minister.

Then damning Somare Junior’s compliance problems with Telikom Sir Mekere tells us:

As with all SOEs, Telikom is required, under the IPBC Act, to obtain the Treasurer’s approval, on the recommendation of IPBC, for all expenditure over one million kina.  Telikom and the Telikom Board have blithely ignored that legal obligation, for several years.  In May last year, Telikom wrote to the IPBC, seeking retrospective approval (which cannot legally be granted anyway) for unapproved expenditure by Telikom going back to early 2007, amounting to about 800 million Kina.  This is not a minor accounting oversight; 800 million Kina is a lot of money, a significant slice of the government’s budget, certainly as far as SOEs are concerned.

This 800 million Kina includes 200 million Kina which Telikom borrowed in 2008 from two banks, as part of a larger proposed borrowing of 340 million Kina, again without any approval from the Treasurer.  Not surprisingly, the banks which lent this money to Telikom are now looking to the IPBC or the Government to repay the money, all of which has been spent.  However, in Telikom’s own words, the 200 million Kina has “not yielded enhanced revenues because the capex programs have not been taken to their logical conclusion”.  In other words, 200 million Kina of borrowed money has been spent, without the required approval, but that investment is not yet producing revenue for Telikom, which now wants IPBC to bail it out.”

The there’s the ‘Woodlawn/MVIL scandal which was resolved early this year when a court found for MVIL.

At the time Sir Mekere stated that he feared that 90 milion Kina was placed in a dubious investment by Somare – he was right – and it needed an Australian court to sort it out.

…and Falcon Jet – another mess that the current government inherited from the Somares.

Morauta who headed up the paragraph on Air Niugini as ‘Flights of fancy” opined:

The only justification for purchasing the Falcon executive jet in 2010 for well over 40 million US dollars was to satisfy the Somare ego and vanity.

So, all that’s left to be said is “thank you, Sir Mekere” that’s a whole lot clearer now.

But just one question, if I may: under the circumstances, does your new alliance with Somare and family remind you of the Faustian pact? Just asking.