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PORT MORESBY, Papua New Guinea (The National, Mar. 24) – The Prime Minister has taken control of the Mineral Resources Development Corporation in a new drive to use the corporation as a vehicle to borrow from overseas for infrastructure and sectoral development.

In a complementing move, the government has removed all of the state's mining and oil, and gas interests, notably Oil Search and Highlands Pacific, from the Independent Public Business Corporation (IPBC) and restored these interests in MRDC.

It is now using MRDC's Oil Search and Highlands Pacific shares as a guarantee to secure a A$100 million (about K250 million) loan through an Australian investment bank Arthur Phillip

Waigani sources confirmed last night that the responsibility for the development of the state's future involvement in the natural resources sector in PNG through MRDC has passed to the Prime Minister and gazetted in National Gazette No.G14 of Feb 5, 2004. The Minister for State Enterprises and Information was the minister in charge of MRDC and IPBC.

Sources said the Government was unhappy with "IPBC's inactivity" and failure to capitalize on investment opportunities, in one instance losing K138 million in potential profit.

They said it was necessary for the State's natural resource interest to be managed by appropriately skilled people.

They said the Prime Minister recognizes the requirement for a focused approach to optimize the investment outcomes for PNG by an entity that has the specific resource expertise and experience, and skills to develop and implement a natural resources sectoral development strategy for the State.

"MRDC has the required requisite skills, experience and motivation to satisfy the requirements to effectively pursue this course of action," the sources said.

Under the proposed long-term loan facility, MRDC will be the borrower, using the State's 196 million shares in Oil Search as the primary security. The current value of these shares is about A$218 million.

Although the maximum loan value is $100 million, it has been recommended that the State borrow $90 million (about K236 million). If the maximum $100 million is borrowed and the value of Oil Search shares falls, it may be possible to Highlands Pacific shares as additional security. Highlands Pacific is a company that is listed on the Australian Stock Exchange.

The Waigani sources said that without the support of the Oil Search shares, the loan facility would not be provided because the Oil Search shares effectively eliminate any political or sovereign risk that may currently be associated with PNG.

It is proposed that initially, a portion of the loan will be provided to Treasury for temporary budget support. The rest would be invested in treasury bills until drawn down for specific projects, especially participating and buying interest in natural resource projects, and developing an energy sector.

Francis Kaupa of MRDC and IPBC's Dr Moseley Moramoro and Masket Iangalio were not available for comment last night on the "transfer" of powers from State Enterprises and Information to the Prime Minister.

March 24, 2004

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