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The Post-Courier Port Moresby, Papua New Guinea

August 27, 2002

It looks as if the copra growers of Papua New Guinea can hardly wait for deregulation of the buying and selling of their produce.

That’s one way of looking at the latest installment in the copra saga.

As of Friday, unless some Good Samaritan intervenes, the growers will have to store up their bags of copra and hope the stuff doesn’t rot on the beach.

The Kopra Indastri Korporesen, successor to the venerable Copra Marketing Board, is reported to have flouted what the Bank South Pacific says are "proper controls."

For that felony, the KIK’s check accounts with the bank will be closed effective Friday.

KIK’s acting boss and longtime agriculture officer Ted Sitapai says the Government is at fault for only releasing K1.5 million (US$ 384,450) of the promised K4 million (US$ 1,025,200) in aid to keep KIK going.

Well, KIK might be the first government-supported institution to get the stark truth from the new government. That is, whatever the former government told you, don’t expect it to come true.

There’s a new regime in town and they are going to impose their own rules on the game.

One of the vital conditions of the game is that the treasury is almost bankrupt.

Old promises made during the heat of the 2002 election campaign aren’t worth a devalued kina.

The Somare-Marat team has to make drastic cuts to spending and if their words so far are anything to judge by, the bleatings of the newly installed KIK team will fall on largely deaf ears.

An alternative is for Cabinet to charge ahead with the deregulation of copra buying and exporting.

Put it in the hands of private enterprise, ensure competition and watch from the sidelines with inspectors with powers to protect the growers if the private operators flout the rules.

That’s what privatization of vital services is all about.



PORT MORESBY, Papua New Guinea (August 27, 2002 – Post-Courier)---More than 300,000 copra producers have been left in limbo with cash-strapped Kopra Indastri Koporesen Board’s decision to stop copra trading yesterday.

And moves to de-regulate copra buying have also been fast-tracked with plans to have a Cabinet submission ready for approval by mid-week.

KIK boss Ted Sitapai outlined this in a letter to the Bank of South Pacific, which has told the organization it will close its accounts this Friday.

BSP has taken the step in view of KIK raising checks through its copra depots when there was a lack of funds and in the absence of an overdraft facility.

The bank, in a letter, says this constituted "a lack of proper controls" by KIK.

But Mr. Sitapai yesterday blamed shortfalls in government funding, a six-week turn-around time in buying of copra from producers and then exporting it as well as legal action by a major UK buyer and subsequent negotiations delaying exports.

On top of that, he said debts from Copra Marketing Board (CMB) were also a big burden.

KIK officials, the Department of Agriculture and Livestock and other stakeholders yesterday scurried to regroup over the BSP threat as well as finalizing the regulatory mechanisms to de-regulate the copra trade and brief Agriculture and Livestock Minister Moses Maladina, who would sponsor the Cabinet submission.

One stakeholder wanted KIK abolished while another called for unity within the industry for the sake of the 300,000 producers in a myriad of reactions.

Mr. Sitapai described the notice by BSP as "a major blow" on plans to "restructure and modernize the coconut industry."

"As the only bank with the extensive network throughout PNG, CMB (Copra Marketing Board) and now KIK, has benefited from the bank’s services in all our major production areas and export points," said Mr. Sitapai, in response to the BSP letter. "No other bank in PNG has that comparative advantage, and if your bank’s decision is non-negotiable, then KIK has no other option but to immediately cease its copra trading business."

In the same letter, he explained that the K1.5 million injected by the government in late June had resulted in the creation of an "at call" account as the sweeping account for KIK’s daily copra trading with an initial capital of K1.2 million — while K300,000 was used to pay outstanding trade creditors inherited from CMB.

[NOTE: K 1.00 = US$ 0.2563 on August 27, 2002]

He said that this K1.5 million was merely a portion of the K4 million that had been requested and approved by NEC earlier in the year.

"In a rising market situation, our total weekly trading over June-July and to the present was no less than K500,000. Over this period, KIK Board had three court injunctions instituted against it by its major copra buyer, L.M. Fischel of UK," he said.

This injunction delayed KIK from exporting 2,300 metric tons of copra valued at US$ 352,000 (K1.4 million).

"To date, we have only exported two-thirds of this volume contracted to the UK buyer. The total copra stock awaiting export as of August 23, 2002 is 2,700 metric tons, valued at US$ 499,500 (K1.99 million)," Mr. Sitapai added. "The contracts with our copra buyers require them to facilitate payment of 90 per cent of the proceeds, 24 hours after our declaration of tonnage shipped either from Kimbe, Lae, Madang or Kavieng. Our main problem has been the slowness of the copra stock being shipped out of the smaller ports to the four main export ports.

"By past records, it usually takes a total of six weeks from when the copra is bought from producers, to when it is sold and shipped by a buyer."

Mr. Sitapai said that during the time, up to 4,000 metric tons of copra can be held in storage, tying up cash of between K2-3 million.

"The Board is of the view that the K1.5-million grant from the Government was insufficient in a rising market situation," he said.

"However, there is no guarantee that the remaining Government grants of K2.3 million would be released and our cash-flow projection to the end of the third quarter reflected that scenario.

"To address the negative financial position of KIK, the Board has decided to immediately deregulate its copra marketing business, and it shall be issuing licenses as soon as the regulations have been approved by the Head of State," Mr. Sitapai said.

For additional reports from The Post-Courier, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Post-Courier (Papua New Guinea).

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