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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

$2 Billion Commercial Rice Project In PNG Terminated
Project cut over legal concerns, possible rice monopoly

By Isaac Nicholas

PORT MORESBY, Papua New Guinea (PNG Post-Courier, Nov. 8, 2012) – Agriculture and Livestock Minister Tommy Tomscoll has terminated the proposed US$2 billion commercial rice project in the Kairiku-Hiri District of Papua New Guinea’s Central Province.

The proposed rice project has been linked to controversial fugitive Joko Tjandra and allegations against some Ministers in the current O’Neill-Dion government fast-tracking the project.

Minister Tomscoll in a letter to Secretary for DAL, Dr. Vele Pat Ila’ava stated that the project did not follow proper and correct project formulation process before seeking approval from the NEC.

He said this includes compliance with the requirements of the Environment Act, the Forestry Act, the Customary Land Act, Land Group Incorporated Act and other relevant and applicable laws of PNG.

Mr. Tomscoll said the project formulation process engaged to bring about this project proposal ran against the grain and thrust of transparency, accountability and good governance.

"In light of the past failures of those engineering this project... You are instructed to discontinue negotiations on the preparation of a Deed of Agreement (DOA) between Naima Investments Limited and the State of PNG."

Minister Tomscoll said the DOA cannot be executed without undertaking the necessary and critical investigation, and documenting the legal correctness of documents such as; the ILG certificates, title issued over the customary land, sub-lease of title to Naima Investments Ltd, approved survey plan of the proposed project area, project benefit sharing code, environmental permit and forest clearing authority permit.

He said he was also briefed that that National Executive Council (NEC) also approved K4.88 million [US$2.3 million] to support further work on this proposal through the National Project Steering Committee (NPSC) in 2012, and DAL also allocated K1 million [US$478,570] from its activity budget to co-ordinate and monitor land mobilization and socio-economic feasibility programs relating to the study of the proposal.

"These monies expended by DAL to formulate a project proposal, in my view amounted [to] wastage expenditure that should really have been picked up by the proponent of the project as sunk cost."

Mr. Tomscoll said as a result of the let-down of that money, he instructed the immediate disbanding of the NPSC.

He said Naima Investment Limited has been seeking from Government; approval for a 20-year exclusivity as sole rice grower of a large scale commercial rice farming; approval from PNG government to apply a 80 percent import levy (increase tariff) on all imported rice; and approval for a 24-month preferential import levy at zero rates.

"In the event the Government granted all the approval sought, Naima Investments Limited, would without doubt in my mind, create a monopoly in the market and competition will erode giving way to dysfunctional and inefficient systems that may add to high cost structure already experienced in PNG."

Mr. Tomscoll said in a market that only has one or few suppliers of rice, prices can be controlled meaning that the consumer does not have a choice, cannot maximize total utility and have very little influence over the price of rice.

PNG Post-Courier:
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