Governor’s Speech Bank of PNG’s 44th Anniversary Ball – The Stanley Hotel & Suites, 4th November 2017
Good evening All.
From here the view is wonderful! I see a sea of smiling faces of the people who contribute to the success of the Bank of Papua New Guinea. What a glamorous audience!
I am again delighted to welcome you all to the Bank of Papua New Guinea’s 44th Anniversary Ball. As well as our special guests and Members of the Board joining us here tonight, on behalf of the Bank’s senior executive team I would also like to acknowledge the spouses of our staff members. We really appreciate the support you give our staff on the home front. All your presences tonight adds impetus to the occasion.
We are here tonight to mark the 44th anniversary of the Bank’s establishment and to celebrate our achievements over the past 12 months.
In our journey, we can be proud of a number of great achievements and milestones in;
A. Conduct of Monetary Policy
2017 has been a challenging year for the conduct of monetary policy given the government’s cashflow constraints and the 2017 National Election. The Bank however managed its price stability objectives by keeping inflation at 6.0 percent in the first quarter and 5.8 percent in the second quarter of 2017. This was done through the successful sterilisation of excess liquidity in the financial system. Since price stability is the main objective of the Central Bank, critiques can be silenced by the inflation outcomes for the first and second quarters of 2017.
Fiscal considerations continue to play a part in the conduct of monetary policy. The Bank continues to coordinate with Government’s fiscal policy to achieve the right policy mix that will sustain growth that is non-inflationary in the medium to long term. As part of the new Government’s 100 Day 25 Point Plan to restore confidence in the economy, it was agreed for the Bank for foreign exchange intervention of USD100.0 million to assist clear some of the outstanding import orders in FX market. That amount was completed by the week ending 27th October 2017. So the Bank has honoured its commitment.
The Bank has introduced a new Tap facility to on-sell Government securities, comprising both Treasury bills and Treasury bonds, to allow broader participation from individuals, businesses, Government agencies, other institutions and offshore investors. The purpose is to develop a savings culture in the country, provide additional avenue for investment and encourage the development of the domestic capital market. The number of individual investments in the Tap facility is continuously increasing.
Going forward, and into the new year 2018, current challenges to monetary policy will remain and new opportunities arise with the country hosting the APEC Summit in 2018.
B. Financial System Supervision
In 2017, as in all past years, the financial system of our country continues to be stable as a result of prudent oversight and management by boards and management teams of the respective licensed financial institutions (LFIs). This is testament of our strong supervisory enforcements and our continuous prudential consultations with the LFIs. Key performance indicators of the LFIs such as strong capital, very low non-performing loans and so forth are healthy signs of the financial system. This is essential to ensure the ongoing protection of depositors’ money in banks, finance companies and microbanks, contributors funds in Super Funds, policyholders covers with life insurance companies, and members’ funds in S&L societies.
Our commitment to financial inclusion and education has been strengthened through our close connection to CEFI, the Centre for Excellence for Financial Inclusion. During the year we hosted three important events, the Pacific Islands Regional Initiative, the first PNG blockchain seminar and the Financial Inclusion Innovation Summit, all aiming to help bring cost-effective financial services to people in our society who do not have easy access to traditional banking.
We are keeping a close eye on the future, with innovations like blockchain technology, where our society may use cashless financial solutions to fuel development, particularly in remote areas.
I believe that Blockchain can help us tackle some of the biggest problems we have in PNG including identity, financial inclusion and access to green energy
But for now cash is also our business. We are making very good progress in the construction of the Lae Currency Distribution Facility. We are now about to start staff recruitment planning.
B. Payment systems.
We have transformed our payment system to world standards through the integration of IT systems. These have increased efficiency in the payments, clearing, and settlement systems. We now have the Real Time Gross Settlements (RTGS) Systems that allow settlements in real time, full automation of the Clearing House, cheques that took more than 7 days to clear can now be cleared in just two days. Direct Credits has given our people convenience to bank at any bank.
We are now focusing on the national switch to provide our financial system and our people the convenience of sharing payment devises offered by the various financial institutions.
Our staff have been on the road around the country talking to local PNGns about the important every day money issues and investments.
We are committed to meet the demand of our cash based society. We are taking the Bank to our people by building a fully integrated currency operation in Lae to be open in the third quarter of 2018. We have resized our family of currency Notes and introduced new sophisticated security features on them – this is to ensure our bank notes have built in protection against counterfeiting.
The Bank will issue a special and limited K100 banknote to commemorate the 2018 APEC Summit to be hosted by the Government of Papua New Guinea.
The new K100 banknote will retain its original design elements and security features of the existing banknote except that it will have the overprint design of the APEC logo, and additional security feature called SPARK Live will be added onto the banknote. This security feature will be applied on the K50 and K100 banknotes. The Bank will also issue special coloured 50 toea circulation coin with the APEC logo design.
The Bank also produced a special coloured K5 Silver coin depicting the logo of the Rugby League World Cup as numismatic item to commemorate the event.
D. Administrative Support
Behind the scenes, our work is supported by corporate services machinery, keeping our systems and technology up to the challenge of meeting our evolving requirements, working to have the right people on staff who have the appropriate ongoing training and development – ensuring our premises enable us to work safely and efficiently.
We recently commissioned the Bakani Data Centre to support our transformation from manual to fully automated and integrated processes using evolving technologies. This has, and will continue to deliver efficiencies to our work process. We have also introduced a Time and Attendance system and improving our file management system and moving towards digitalising records.
We have a dynamic Board, made up of representatives from different sectors of the economy. We recently had the first Board meeting offshore in the Bank’s history, in FSM. Whilst we received criticism, the trip achieved the desired outcome of fact finding mission for our business entities in identifying potential business opportunities that will promote PNG business overseas.
We have many challenges in front of us. The much talked about foreign exchange issues, the unbanked, high liquidity, break-down in monetary policy transmission and sovereign wealth fund are just some of the issues that we must address collectively internally and with other government institutions. In addition, international geopolitical issues that has economic implication brings another dimension of challenge we are faced with; in our implementation of policies and surveillance of the financial system and the foreign exchange market. We must develop in-house skills and resources to address these issues and withstand headwinds from global economic developments.
G. One Bank
I have mentioned some of the areas within the Bank that have achieved important milestones since our last anniversary. Be assured I am well aware that these were not the only significant steps forward we made in our 44th year. With this in mind, let us think about the notion of One Bank One BPNG, which is one of our key aims, outlined in the Bank’s Strategic Plan 2016-2020.
Our aim is to present one face to the world, rather than a number of units stitched together to create departments. We have come a long way, through reworking the structure of the Bank to reflect function rather than historical hierarchy.
Last but not the least.
I would like to thank my fellow Board members for their support during the past 12 months. Our Board is active and involved. Ladies and Gentlemen, it is my pleasure to introduce our newly appointed Board Member, Mr Christopher Hnanguie, who is the Chairman of the Securities Commission of Papua New Guinea. Welcome to the Bank of Papua New Guinea Mr Hnanguie.
My sincere thanks go to our senior executives, Deputy Governor Dr Gae Kauzi (at this juncture, I kindly ask everyone to remember Deputy Governor in your prayers for a continuous and speedy recovery), Assistant Governors Mrs Elizabeth Genia, Mr Joe Teria, Mr Ellison Pidik for their commitment and leadership. Thank you also to the Director FASU, Mr Benny Popoitai and Department managers for helping us establish the path forward to One Bank, and working collaboratively to make it happen.
And a heartfelt thank you to our staff. You really are the key to ensuring One Bank becomes a reality. I look forward to standing here next year at our 45th anniversary ball, thanking you all for playing your part in achieving that goal.
Finally, I have considered a new initiative, to support, recognise and reward best performing staff (s) for going out of their way to create incentives that implement and add value to the bank. I have directed Corporate Affairs Group in consultation with the other groups to put the framework together for next year onwards. For this Year, I will be making some announcements towards the end of the year after consultations with HR and the Respective Assistant Governors.
I am sure you will all agree I have spent enough time singing everyone’s praises and that now it is well and truly time to relax and celebrate.
Welcome, one and all!
Enjoy the rest of the evening.
Address by the Governor of the Bank of Papua New Guinea, Mr. Loi M. Bakani, CMG at the 50th Graduation Ceremony of ITI on Friday, 7th July 2017
Thank you for the warm words of introduction.
The Chairman and Members of the Advisory Board, staff and management of the International Training Institute (ITI), parents and guardians, students, and the most important people at this ceremony, our graduands.
I am honoured to be invited as the Special Guest of Honour to this year’s ITI graduation ceremony. It is also the 50th graduation ceremony and therefore marks an important milestone in the history of ITI’s training of students in the fields of business, accountancy, information technology, human resources and management.
The Vision of ITI is to become a high quality institution and to be a leader in distance and international education in the fields of business and information technology. The Focus is on providing quality education at an affordable price. Both the Vision and Focus are commendable goals. I therefore thank the Board, management and staff of ITI for your on-going efforts in educating our students. The over two hundred (200) graduands seated here before us today are testimony to that Vision and Focus. Today marks the 50th anniversary of meeting that Vision and Focus for both ITI and our graduands. Congratulations to you all.
I note that ITI was first established in Boroko, Port Moresby in March 1999 with an initial intake of 30 students. It was the first institute to provide one computer for one student in the class and also to provide night classes for those who were working during the day.
ITI’s popularity and choice as an institute of learning is seen in the fact that it has over the years expanded far and wide across the country. ITI now has campuses in Lae (Morobe), Kokopau (Autonomous Region of Bougainville), Warongoi (East New Britain), Kimbe (West New Britain), Mt. Hagen (Western Highlands), Goroka (Eastern Highlands), Kiunga (Western), Kavieng (New Ireland), Manus, and Alotau (Milne Bay). ITI is ideally placed to train the many students who pass through their campuses.
With a current enrolment intake of over 4,000 students attending its various certificate, diploma and advanced diploma courses in the fields of information technology and business such as accounting, sales, management and human resource, ITI can lay claim to being one of the largest private institute in the country.
Gaining approval from the National Training Council and from the Office of Higher Education as a Private Higher Learning Institution is an achievement for ITI meaning it has obtained recognition from the Government as a leading private higher education institute. ITI’s affiliation with both local and international educational institutions and universities to maintain quality standards is encouraging.
I commend ITI for providing both resident and distance learning opportunities which has increased the educational choices for many of our students, especially after completing high school (grade 10) or national high school (grade 12). The certificate, diploma and advanced diploma courses are targeted to the needs of both the students and their potential employers.
Let me talk briefly on education and the economy.
Every society wants and expects the best from their citizens – to be well educated and to contribute meaningfully to the advancement of their nation. PNG is no different. It is therefore no surprise that the Government of PNG has adopted one such strategy with a Free Tuition Fee Education policy. This policy costs a lot in public money but the benefits are far-reaching, setting the foundation for our children with a formal education. The challenge however is the limited spaces in our tertiary and higher learning institutions. Private learning institutes like ITI therefore complement the Government-owned institutions in meeting that demand for high quality education.
The transformation of the PNG economy since the US$19 billion PNG LNG project commenced around 2010 has been nothing short of amazing. During the time of the construction of the LNG project, PNG had one of the highest growth rates in the world. The spin-off activities and opportunities for business have growth, and so has the expectations of our people. This growth continues today, but at a slower pace. Our economy is heavily dependent on the resource extractive sector, mainly mining, petroleum and gas. We need to move away from these extractive industries and develop the renewal sectors such as agriculture and tourism. These are where the bulk of our population live and where we can achieve sustainable development over time. We need a skilled and educated workforce to realise this ambition.
Most of you will know that PNG is consumer-based economy with much of our spending flowing out of the country through increased imports for goods and services. There is therefore a serious need to develop a savings culture where our people can save their earnings, invest for the future and provide financial security for their family and children. I hope you all have a savings account with a bank or financial institution.
Bank of Papua New Guinea
This brings me to what we do at the Bank of Papua New Guinea.
The role of the Bank of PNG is evolving. Apart from the traditional areas of monetary policy and financial system supervision, we have taken on board new areas of responsibilities.
We have done a lot in the financial sector. The second financial inclusion strategy was rolled out to reach the unbanked population as well as to ensure our people participate more effectively in the financial system. We have modernised our payment system to encourage more electronic payments, thereby reducing fraudulent cheques and improving the ease of making financial transactions. New regulatory standards were introduced for life insurance companies and superannuation funds. We also introduced new Anti-money laundering and Counter Terrorism financing laws to combat financing of crime and illicit activities through the financial system. Our banknotes have been resized to differentiate between the denominations, with the larger denomination slightly bigger than the smaller denominations. These developments are to ensure we have in place a sound and prudently managed financial system. Not only are they part of our legislated roles set out in the Central Banking Act 2000, which governs our activities, but are also for good governance and ease of doing business, allowing business activities to develop and prosper.
The Bank of PNG is an equal opportunity employer and we consider ourselves an employer of choice. We employed a number of staff that have graduated from ITI. At present, we have eight staff that have gone through ITI training courses, attaining certificates in business, business communications and business studies, and diplomas in accounting, management, business management and business and computing.
The Bank recruits at the university level for graduate staff, though staff have joined at the non-graduate levels and work their way up, attaining undergraduate qualification along the way. We look forward to recruiting good graduands from ITI. It is also pleasing to note that ITI has plans to introduce degree programmes in the future.
To the graduands, the desire for learning and achieving one’s goals in life are universal. Every parent wants the best from their child and every student strives to get the best grades in their class. Your achievement today is done with some sacrifice, be it in monetary terms, time, resources and others. A sacrifice on the part of your parent, your guardian, your siblings or relatives, your employer, your sponsor or in some case, your own sacrifice.
ITI has done its part in providing you with an education. Your parents and guardians, employers and sponsors have also done their part. The success of your education achievement however will be judged not so much by the grades you scored but rather by how you utilise it at work and in life. That is the real test. The certificate and diploma you receive today reflects an academic achievement. How you use that, how you manage yourself, how you develop yourself and others, is based on your character, your personality – basically, on who you are.
Some of you already have a job, some will be looking for jobs, while others will create their own jobs. Whatever it is, remember to never stop learning and developing yourself. Your ability to learn, reason and develop is shown in the certificate and diploma you achieved today. When you stop learning, you hinder your own prospects, because others are continuously learning, upgrading and developing new skills. It is a very competitive world out there.
For those returning to their jobs, I trust your achievement here at ITI will enhance your work and make you more productive. For those looking for work, your certificate and diploma will increase your prospects with potential employers. I wish you all the best in your chosen careers.
Congratulations and thank you for your attention.
GENDER EQUITY AND SOCIAL INCLUSION POLICY WORKSHOP
Crown Plaza, Port Moresby
Wednesday 29 March 2017
• Mr. Jack Stanely, Asian Development Bank representative,
• Mr. Simon Ross, First Assistant Secretary, Department of Foreign Affairs & Trade, Australian Government,
• Mr. George Awap – Manager, FSDD & Director for Microfinance Expansion Project (MEP),
• Mr. Saliya Ranasinghe, Director for CEFI and Team Leader for MEP,
• Ms. Robyn Conford, Gender & Microfinance Specialist, MEP,
• Workshop Participants,
• Ladies and Gentlemen.
On behalf of the Governor of the Bank of PNG (the Bank) and Chairman of Centre for Excellence in Financial Inclusion, Mr. Loi Bakani, CMG, I welcome all the participants to this important workshop where there is opportunity for us to interact and discuss the draft Policy on Gender Equity & Social Inclusions which we can operationalize in our respective financial institutions.
GENDER EQUITY & SOCIAL INCLUSION POLICY
The design of Microfinance Expansion Project included Gender Equity as a very specific focus issue for mainstreaming and a Gender Action Plan was implemented right from its inception.
All (MEP) Project staff became more gender aware through training and other group activities throughout the course of MEP. It is very encouraging to note some of the gender-related key achievements of the project.
1. All the financial and operational data collected by the project are gender segregated
2. MEP partners have reached 419,861 of that 45% are women
3. MEP has provided 3,526 person days of training of that 49% are women participation
4. Of the 27 products designed during the course of the project, 5 are targeted to women and the others are gender neutral
5. Financial education training has reached almost 170,000 people now, 47% of those have been women
6. Business Development Support training has reached 3298 people, 65% of those trained have been women
7. The Risk Share Facility established under MEP has supported K12.1 million loans; of that amount, K3.3 million (25%) has been loans to women.
Gender is a cross cutting issue and has therefore become a theme which will be mainstreamed within all aspects of Financial Inclusion Strategy implementation. The first National Financial Inclusion Strategy resulted in over 1.2 million new entrants accessing the services of the mainstream financial institutions (unbanked became banked); of that figure, 30% were women. The second financial inclusion strategy that was launched in December 2016 expects 50% of women participation in the targeted 2 million new entrants to the financial system over the next four years.
To demonstrate the Bank’s seriousness to reaching out to more of the unbanked women across the country, the Governor issued a banking licence to Women’s Microbank in 2015 to reach out to all women in PNG. This is the first of its kind in the region.
A financial competency study conducted by the Bank indicated a lack of financial services for rural women particularly. Digital financial services have been given a prominent place in PNG’s Second National Financial Inclusion Strategy. We understand the importance of facilitating the ability of financial institutions to bring these services to the rural sector so that women particularly will be given the opportunity to benefit from secure and safe banking services.
After the full implementation of the new National Payments System (KATS), the Bank is now actively working on developing a national switch platform which will enable other micro banks and savings and loan societies and any other mobile phone or card payment service providers to provide digital financial services to their customers. This will facilitate inter-operability and bring many benefits for women especially. Internationally, the introduction of digital financial services has resulted in a huge increase in the number of people, especially women, who can and do access financial services and find the features of these services overcome many of the barriers which have previously excluded them.
The development and implementation of a Gender Equity & Social Inclusion Policy for Microfinance Institutions is a logical next step in the journey to inclusive financial services for all in PNG.
I hope today’s deliberations will assist our microfinance partners to fine-tune this policy document and develop implementation strategies so that inclusive and gender equity policies and principles can be integrated within the day-to-day operations of each of their organisations and in the development and delivery of services and products to their customers.
I expect that such policies need to be considered as a priority by other Financial Institutions too – so your success will pave the way for it.
I wish you all the best in the discussions.
Thank you and God bless you all.
Assistant Governor, Financial System Stability Group
Bank of Papua New Guinea
29 March 2017
Closing address by Governor Mr Loi M. Bakani, CMG at the SEACEN COURSE on Macroprudential Policy (Joint with Macroeconomics & Monetary Policy Management) Alotau, Papua New Guinea 26 August 2016
GOVERNOR MR LOI M. BAKANI, CMG
SEACEN COURSE ON MACROPRUDENTIAL POLICY
(JOINT WITH MACROECONOMICS & MONETARY POLICY MANAGEMENT)
ALOTAU, PAPUA NEW GUINEA
26 AUGUST 2016
o Mr. Michael Zamorski, Director, Financial Stability & Supervision, Payments & Settlements Systems, The SEACEN Centre
o Mark Mckenzie, Senior Analyst, The SEACEN Centre
o Resource Persons
As the saying goes….”All good things must come to an end”. You have come to the end of the Course on Macroprudential Policy (jointly with Macroeconomics and Monetary Policy Management).
I sincerely hope this one week has provided a fruitful forum for you, as each one of our jurisdiction embark on implementing this complex but yet necessary international policy agenda.
Since there is not much history to learn from in terms of the implementation of macroprudential policy, each other experiences maybe the best next option and I hope this week has provided you with some useful takeaways.
I understand that there have been a lot of discussions and interactions generated among yourselves during the week. The challenge now is to maintain the network and dialogue. I personally believe in the importance of discussions and establishing networks among the Regulators. Firstly, to share the country experiences on what works well in one country and what does not in another. Secondly, to share the different ways and approaches of detecting and measuring systemic risks and so forth. And most importantly because the establishment of Macroprudential Policy governance framework is at varying stages from country to country – some jurisdiction have advanced in establishing their systems while others are still at initial stages.
Additionally, I believe that there is no “one size fits all” and therefore let’s continue to appreciate the importance of future research into the topic of Macroeconomic Policy and to better understand the local dynamics in any given jurisdiction while taking into account the global interconnectedness. I think this is critical for any country when it considers the kind of institutional arrangement which works, before it can adopt it.
It is my view that going forward, like other policy frameworks which have been well established in the Central Banks or Monetary Authorities such as microprudential supervision and monetary policy frameworks, that Macroprudential Policy will demand more of our attention in the future. Regulators will therefore need to continue to invest into it by ensuring appropriate institutional arrangements and instruments/tools are established, and that staffs are adequately trained to be able to implement these initiatives. This week’s event is a very good example.
I understand Bank of Indonesia presented their experience in implementing Macroprudential Policy during the week and I think their experience should be a useful takeaway because of the similarities of our economics.
If learning from each other’s experiences would be the way forward then our regional research centre – SEACEN should be utilized for research and collating of cross country experience with increased frequency.
One of your sessions this week also allowed the findings of one collaborative research of SEACEN member countries on counter cyclical capital buffers to be presented, led by an eminent expert in Dr. Saurabh Ghosh from the Bank of India. I hope there were useful takeaways also from this work and I am happy to advocate more collaborative work among our countries on this policy, as well as others.
At this juncture, I would now like to thank the SEACEN Centre and SEACEN facilitators for staging this course in PNG, and for agreeing to our proposal to have it conducted in beautiful Alotau. I also extend my appreciation to the facilitators from outside of the SEACEN Centre – for sharing your research work and wealth of experiences with our participants. I understand some of them have left during the week.
I would like to take this opportunity to wish all our MPP participants from SEACEN member counties all the very best for the future. Please extend my sincere thanks to your Governors or MDs (for Monetary Authorities) for allowing you to attend this MPP course.
The Bank of Papua New Guinea is pleased to have been given the opportunity to host this course and we hope you will not only take away the professional insights from this course, but increased your network within regional central banks and a beautiful memory of this part of our country. Now you can claim you have been to PNG, as you now have a good idea of what our country can provide and offer you.
I wish you safe journey back to your home countries.
I will not say “Aioni – Good-bye”, but say “Goodie”, because you need to come back and visit PNG again.
Thank you for listening.
Keynote Address by Mr Loi M Bakani, CMG Governor, Bank of Papua New Guinea To the 38th MEETING OF THE SEACEN DIRECTORS OF RESEARCH AND TRAINING MEETING AND HIGH-LEVEL SEMINARS
BANK OF PAPUA NEW GUINEA
Mr Loi M Bakani, CMG
Governor, Bank of Papua New Guinea
To the 38th MEETING OF THE SEACEN DIRECTORS OF RESEARCH AND TRAINING MEETING AND HIGH-LEVEL SEMINARS
Alotau, Papua New Guinea, 17-20 August 2016
Dr. Hans Grenberg, Executive Director of SEACEN and your team from the SEACEN centre, Mr. Peter Webb, Director of Research and Curriculum and your team from the Icliff Leadership and Governance Centre, Mr. Bejoy Das Gupta, Chief Economist for Asia Pacific at the Institute for international Finance, Directors of Research and Training from members SEACEN economies and invited central bank representatives, distinguished guest, ladies and gentlemen.
Let me first of all extend a warm welcome to all of our visiting guests to beautiful Alotau in the lovely province of Milne Bay. We have decided to take the SEACEN DORT meeting away from the hustle and bustle of a modern big city like Port Moresby where we previously hosted the SEACEN Board of Governors meeting in 2014 and the SEACEN EXCO last year. This time, we want to give the opportunity to many of you to see another part of Papua New Guinea – the quiet, provincial and rural setting of which the majority of our people live in, surrounded by beautiful natural scenery and experience the warm hospitality of the local population. I am sure over the next few days you will get to see and experience what I am talking about.
The vision of SEACEN is to be a regional training hub for central banks in the Asia/Pacific region. Its mission is to build capacity in central banking and foster networking and collaboration between members. The DORT Meeting is the start of the process where all of you as Directors of Research and Training decide on what our staff should receive training in during the coming year. The proposals go before the Deputy Governors at the EXCO Meeting for consideration before approval by the Governors at the Board of Directors Meeting. I therefore cannot stress enough the importance of the DORT meeting. Your deliberations are the initial basis from which we shape the capacity of our staff, in fact, our Central banks in the SEACEN family.
The type of training courses and research programmes will determine how we as central bankers in SEACEN deal with the challenges of effectively managing monetary policy, ensuring financial system soundness, having secured payment systems, and good governance structures in an ever-changing world of globalisation, rapid modernisation within our economies and fast evolving technological changes. I do not have to mention that we also live in one of the fastest, if not the fastest, growing regions of the world. The role and functions of central banks have evolved over time to encompass new thinking in academia, trends in global financial markets and macroeconomic developments, and the demands of a more literate and educated population.
I am therefore pleased to note from your programme that the sessions cover a good mix of policy discussions on recent issues in monetary policies and in supervisory and regulatory policies, global trends and relevance to Asian banking sector leaders and eco-system awareness. These are all important given the unconventional monetary policies adopted by major central banks around the world in recent times and the challenges of effective monetary policy management. There are also emerging issues of concerns for supervisory policy in light of recent financial crises. These are issues we also face here in Papua New Guinea. For instance, we are reviewing the effectiveness of our monetary policy signalling rate in transmitting to market rates, managing monetary policy in an environment of high economic growth with manageable inflation and our drive on financial inclusion and financial literacy to reach the large un-banked population in our country.
In recent times, governance has come to the fore in the way central banks operate, relating to the areas of credibility, integrity, transparency, accountability and independence. Our role as central bankers depend not only on how we can manage macroeconomic and monetary policy, as well as financial stability and supervision policy effectively, but also importantly on whether we have credibility in our leadership skills and governance attributes. I am therefore glad that your break-out seminar sessions for the research and training seminars adequately covers these areas.
I am confident the resource persons engaged will cover important agendas to stir your thoughts and enrich your experience this week, but let me reiterate that as leaders in your fields of expertise in research and training etc, there is a demand for each of you to go beyond just being technical experts in your field, and to appreciate the necessity of bearing the responsibilities of leading people. The demand to set standards,influence your followers and to create a positive life-long learning culture can be daunting but it is the right path to take. It is achievable as we come together in such forums to exchange ideas and learn from each other. We have a task to see things from different perspective, embrace change and allow it to permeate the norm and our comfort zones. We can no longer operate in isolation and which I want to agree that the eco-system paradigm and perspectives should be embraced to trigger transformation in how we lead and manage. The Central Bank and its mandate functions are a function of a spectrum of variables that make up an entire environment we operate in. We are interconnected and hence our effectiveness depends on each player’s reactions and contributions in the network or chain. We must address risks and issues from a systems thinking perspective. So when there is a change introduced in our governance standards, macro prudential policies or as result of information communication technology intrusions in the way we do business, the entire eco-system and the stakeholders become our focus.
Bank of PNG has seen number of changes in our past strategic plan. We continue to see more in our new strategic plan 2016-2020. We have drawn invaluable lessons from these experiences. One of them is to be able to have competent program managers and leaders who understand the learning process that’s taking place in the mind in any introduced change program. Building on from the “known” (referring to existing knowledge) and leading people to the “unknown” (new knowledge) is wise strategy and fundamental to enhancing the learning process of followers in terms of making quick wins. Change initiatives may not realise their objectives if we apply one-size-fits-all approach where something (it could be framework, policy or a system) completely new has been introduced to replace the old practice without much thought given to make necessary tailoring and appropriate connectivity with the people and current process. This is to ensure a smooth transition occurs. Another lesson learnt is that the leader-manager plays significant role of influencing and creating the right kind of environment conducive for followers (staff under you) to be creative and to perform without fear. With the foregoing, I am sure a rewarding experience will be achieved during the combined and the split sessions.
To conclude, Papua New Guinea is aptly known as the “land of the unexpected” – the land of a thousand tribes with over eight hundred distinct languages. While our people still hold fast to our heritage and ancient culture, we have embraced modernisation and are a rapidly developing economy. During your stay you I am sure you will appreciate what I am saying. I therefore hope you can enjoy your time here in Alotau, experiencing the culture of the Milne Bay province and visiting some of the tourist attractions here.
Once again, welcome to Papua New Guinea. I hope your stay in Alotau will be an enjoyable and fruitful one.
Statement by Governor of Bank of PNG, Mr. Loi M. Bakani CMG at the Opening of the Financial Inclusion Exposition in Mt. Hagen, 15th July 2016.
[Speech in English but presented in Tok Pisin]
Acknowledging the presence of:
-Western Highlands Provincial Administrator
-Executive Officer from office of Governor, Hon. Paias Wingti
– Representatives of partner financial institutions
– People of Highlands region attending the Expo
Firstly, I want to welcome you all to the 3rd major Financial Inclusion Exposition hosted in our beautiful city of Mt. Hagen.
Secondly, on behalf of the Bank of PNG together with our partner Financial service providers, donors, telecommunication service providers, NGOs, Government agencies, our various program partners like church groups, media organisations, and other service providers, we would like to give you the people of our highlands region the opportunity over the 2 days to interact and engage with us and learn, sign up on the various services/products we provide and leave after the expo satisfied. We want you to start the journey of your lifetime that will see you change your way of life and improve or take you to another level. This is your opportunity that we bring to you.
Thirdly, we want to impart this awareness and knowledge of the various services and opportunities that are made available by our partners at the Expo to our children, through financial education and training. We are putting strong emphasis on our children because they are the future of our country and we do not want them to miss the opportunity, like our adult generation.
Finally, we want our mothers and women to have the opportunity to further their skills and knowledge so they can take their income earning activities that they are involved in now, to another level. We also place great emphasis on women as they are commonly known for being the best in money management.
Now, what does financial inclusion mean? Why do we drive financial inclusion in PNG? Why do we use expos like this as a means for us to drive financial inclusion?
Financial Inclusion simply means to have access to any form of financial services and products that are available with different financial services providers, so that having access to these services/products can enable you to improve your livelihood. These services can be in the form of bank account, advisory services, financial education training, mobile phone banking service, and others. I mentioned the word opportunity more frequently earlier, because knowing and realizing opportunities available is also a product that you can access through financial inclusion activities such as this expo.
We are driving financial inclusion because of the fact that 70-80% of our population does not have access to any form of financial services. In PNG, majority of our population live in rural areas, and are involved in subsistence farming, producing for own consumption and also for cash income. But if financial services are not available, then that cash income cannot be held in secured place such as in banks. So they are not financially included. We aim to reduce this percentage of the unbanked population and bring them to the formal financial service sector.
But be aware that if you do not have a savings account with any of the financial institutions that are licensed and supervised by the Bank of PNG, do not be mis-led by anyone who promises to pay you interest rate in access of current market rates if you place your cash with them. These types of people or arrangements are money schemes, and you will lose your money if you place it with them. Its not a safe investment unlike if you place it in a formal savings account with the financial institutions that we licensed, and some of them are present here at this expo.
Another basis for driving financial inclusion is to take advantage of the focus of Government on provincial and district development through infrastructure developments like roads, bridges, telecommunication, ports, and others. These developments are creating an enabling environment for us in the financial services sector to be able to rollout our services to reach the people in the rural areas and districts. We acknowledge that travelling to access financial services in urban towns are expensive and time consuming. But at least we are already making headways because of modern telecommunication and technology like mobile phones and internet, so we are taking advantage of these infrastructures to develop products that people can access financial services where they are and also overcome these high costs of travel.
At this juncture, I would like to emphasis that providing these financial services to our people also comes at a costs to those that provide them. So its important that wherever and when these services are provided, whether it be a bank branch or agency in rural area or in town, we must respect and care for them. We should embrace them and tell ourselves how lucky we are to have such services made available to us. Because if they are closed or cease to be made available to us, not only we are going backwards, but we must be prepared to pay the cost of long distance travel to access the same financial service.
The way ahead to achieve our goal of reducing this 70-80% unbanked segment of our population remains a big challenge for us in the financial services sector. But based on our experience and given our firm commitment to drive financial inclusion and ensure more and more people can have access to financial services, it is not an impossible task.
Once again, I urged you all mainly those who do not have any form of engagement with our financial service providers, especially our women and children, to make use of this opportunity right before you, to engage by enquiring, learn from the training to be hosted here at the expo and get financially included with accessing any products and services available from our financial services providers.
Enjoy the 2 days here at the FI Expo, and wish you success in your financial exploration.
Thank you olgeta and God bless.
Governor of Bank of PNG talking points at the Savings and Loan Societies Industry Meeting 25th
TALKING POINTS FOR GOVERNOR
AT THE SAVINGS AND LOAN SOCIETIES INDUSTRY MEETING
25th May 2016
HOLIDAY INN HOTEL, PORT MORESBY, NCD
- Greetings and Acknowledgement
- Mr. Jack Namaliu, Chairman of Federation of Savings & Loan Societies (FESALOS),
- Mr. Paulus Laveil, Managing Director for FESALOS;
- Board members for FESALOS
- Mr. Pierre Seguin, Financial Sector Supervision Advisor, Pacific Financial Technical Assistance Centre (PFTAC)
- Directors, Managers and staff of Savings and Loan Societies;
I take this opportunity to thank all representatives of the Societies present this afternoon at this important S&L industry meeting. I would like to see that discussions this afternoon will aim to clarify the implications of the new S&L Societies Act 2015, which has been passed by Parliament and we hope to be gazetted soon. I must stress that there are benefits and advantages that can achieve when Societies gain full compliance with requirements of the new Act. That is why it is crucial for boards and managements of those Societies who are still in the dark or unclear about the upcoming changes and licensing hurdles set out under the new Act, that they need to ask for clarification and guidance now before it’s too late.
- Continuing Progress and Challenges in the S&L Industry
The continued growth of the industry is noted as shown by the following financial indicators over the past 5 years from 2011 to the end of 2015:
- Total assets increased from K692m to K934m
- Total deposited increased from K411m to K494m
- Number of members increased from 34,987 to 236,173.
On the other end the Bank continues to observe a growing number of Societies practicing poor governance at the boards level, exacerbated by poor and complacent management. A large number of Societies continue to face challenges with inability to afford good Management Information System (MIS) and thus continuously been late in submitting quarterly returns to the Bank, poor lending practices resulting in high rate of default and other compliance issues.
The Bank, in collaboration with some local institutions and development partners, will continue to provide capacity building initiatives to build and promote good governance and proper risk management practices in the Societies with a objective of growing and safeguarding the interest of the members. This objective has been supported by many development partners in region, including our friends from PFTAC, APRA and many others. In PNG, I acknowledge the invitation taken by FESALOS, IBBM and the Microfinance Expansion project (MEP) for partnering with the Bank in facilitating training programs for savings and loan societies.
So the journey has not been smooth and not really pleasing either. There is more we can do and good benefits which we can realized. And this is the reason why this industry is going to move into the newly passed Savings and Loan Societies Act.
In terms of the modernization process, as Societies move towards complying with the requirements of the new Act, let me emphasize a number of areas which I would like to challenge the Societies and the FESALOS to see this industry implementing under the new Act:
- Benefits and Advantages under the Savings and Loan Societies Act 2015
The new Act aims to bring modernization to the S&L industry. The following are some of the benefits we expect the Societies to realize as they meet the transitional and licensing requirements:
- Improved governance – the societies will bring on to their boards independent directors with professional experience in key areas such as banking & finance, legal, accounting, business management, risk management and governance. One of the key aspects of governance is to ensure enforcement of full disclosure of business connections by members of the board and management of Societies.
- Prudent management by societies – strong boards will ensure effective, efficient and performing managers,
- Lending and other core business activities of the Societies will be market and risk based, deploying appropriate technologies to manage risks through innovation and smart management techniques,
- Opportunity to offer wide range of products & services including to offer interest rates for loans at market basis,
- It also provides the opportunities to expand its member base and grow the business.
- Prudential supervision by the Central Bank will be risk-based.
The overall aim of this modernization process is to have well governed Societies that that are high performing in terms of profitability, growing their assets, member benefits and savings.
- Opportunities for Innovations & Growth
- National Payments System
PNG has a world class national payments system, called KATS, which provides real time settlements and clearing for direct debits, with the exception of Cheques truncation which takes at most 3 days to clear.
Over the next several months PNG should have in place a national payment switch which will provide interoperability between all deposit-taking institutions, including S&L Societies, and in particular between all users of electronic cards and mobile phones. This is creating an ecosystem which opens up the ability for members of your Societies and other depositors to transact widely, either through cards or smart mobile phones. It is an opportunity for Societies to be part of an ecosystem to enable growth, by exploring new initiatives and products that could be created using this modern system.
- Societies to Develop Banking and Lending Policies to Grow SME
The National Government has now in place a National SME Policy. Societies are encouraged to develop specific policies and strategies to support business related lending for members to grow their small businesses and create wealth (assets) and savings. I encourage FESALOS to look at this opportunity with the Societies to see how the industry can play a key role in operationalizing lending for SMEs.
- Registration of personal movable assets as securities for loans
The National Government has in place a Personal Property Security Act (PPSA) which will enable individuals to pledge their moveable assets in order to access finance to develop business initiatives. Essentially, the PPSA will enable lending institutions such as S&L Societies to secure movable assets such as motor vehicles, chattels in the homes as collaterals to be able to lend to members. I encourage Societies and guidance from FESALOS to tap into this opportunity.
- Strategies for Product Development, Promotion and Awareness
The Societies, as they embark on finalising their Strategic Business Plans (SBP) to start developing specific innovative ideas and strategies for developing member-relevant products and marketing & awareness. It is expected that the SBP will set out the type of membership/clientele each society is expected to serve or tap into, and likewise must aim to develop products which are appropriate to promote relevance and so forth.
- Partnership with Others like NGOs and Telecommunication Companies to complement operations
In addition to Strategic Business Planning, Societies are encouraged to consider establishing strategic business partnership with NGOs or Telecommunication companies to tap into innovative ways of growing and strengthening S&L businesses or other complimentary business activities.
- Strategic Business Planning Preparedness by Savings and Loan Societies
I have clearly stated above the benefits and advantages which Societies will tap into in their process of modernization under the new legislative framework. I have also highlighted some of the many possibilities which FESALOS and the Societies should seriously consider in building into their Plans.
From the information provided by the Societies through the checklist and their strategic business plans, I advise that some of the societies are not prepared to adapt to the changes brought about by the new Act. I urge those Societies concerned to devote ample time and commitment to put in place what is required from them.
During the two day workshop on analyzing your financial statement, you will be able to understand where you stand as far as your financials are concerned. Take advantage of his training and participate actively.
- Concluding remarks
In conclusion, I encourage all societies to take this meeting as an important forum to assess where you are and what is expected of you to modernization the respective operations, and be actively involved in the transformation of your society and industry under the new SLSA.
Finally, also I take this opportunity to thank the board of FESALOS for organising the industry meeting as well as the two day workshop. I would like to also thank Mr. Pierre Seguin and PFTAC for the support in strengthening the financial sector in the Pacific, particularly in PNG. I wish you all a fruitful meeting and a successful two day workshop starting tomorrow.
God bless you all.
Mr. Loi M Bakani, CMG
Governor & Registrar
Savings & Loan Societies Industry
Presentation By Mr. Loi M. Bakani, CMG Governor at 32nd Australia-PNG Business Council Forum
Mr. Loi M. Bakani, CMG Governor
32nd Australia-Papua New Guinea Business Council Forum
Cairns, 16 May 2016
The Papua New Guinea Economy
Thank you Master of Ceremony, Dignitaries, Professor Satish Chand, distinguished quests, ladies and gentlemen. I want to thank the organizers for inviting me to present the Papua New Guinea Economy to the Business Forum.
In recent years and months some commentators criticized the Government and Central Bank’s management of nation’s affairs. I decided to use this opportunity to present the facts, that in most instances are misrepresented by the critics.
I will start my presentation with the development in the most important and basic measure of economic performance-Gross Domestic Product (GDP). The new nominal GDP data released by the National Statistical Office (NSO) at end March 2016, showed that the size of the economy is much bigger than earlier estimated. We have a very long streak of GDP growth lasting for the last 14 years. In the last five years 2010 to 2015, Nominal GDP grew from K38.6 billion to K64.2 billion, a growth of 69% or on the average by 13.8% per annum. Per Capita Nominal GDP grew from K5,456 to K8,378, that is a growth of 54% or an average of 11% per annum.
Many might think that this growth have been inflation driven. Let us look at the Real GDP numbers. Based on the new GDP figures from NSO, we deduced that Real GDP grew from K17.3 billion to K27.1 billion, a growth of 59% or an average of 12% per annum. The per capita real GDP increased from K2,443 to K3,547, an increase by 45% or an average of 9% per annum.
The new GDP outcomes also refutes the claim of very high deficits to GDP ratios, which the commentators used in their statements that the Government and the Central Bank are driving the country into bankruptcy. The actual average deficit for the five years was 3.6%, and not the 4.9% as claimed by the critics. The earlier released budget deficits for 2014 and 2015 of 7.3% and 5.0% of GDP, respectively, are now revised to to 5.3% and 3.9% of GDP.
No deficit is justified if it is not used to fund priority areas. The Government of the day defined the priority areas as Health, Education, Law and Order, Infrastructure, Economic Sectors especially Agriculture and Rural Development for inclusive growth. If we add up the expenditure in those five priority areas as part of the total expenditure in the last five years, the actual expenditure varies from year to year, but the average was above 68% of total expenditure. This is a strategic turn around from past years and PNG stands to benefit from their social and economic returns in future.
The other claim flaged by critics was the breach of the Statutory Lending Limit in the Fiscal Responsibility Act, which is the Debt to GDP ratio of 35%. Based on our calculations using the new GDP figures released by NSO, the Debt to GDP ratios are now 25%, 27.2% and 28% for 2013, 2014 and 2015, respectively. The highest level was reached. There was never a breach of this statutory limit.
Of the total debt of K18 billion, K3.9 billion is External Debt, or 5.5% of 2015 GDP, and all others comprised of concessional loans from bi-lateral and multi-lateral donors, the Asian Development Bank (ADB), World Bank (WB), Japanese International Cooperation Agency (JICA) and Australian Government, with low interest rates and long grace periods on both interest and principal repayments. Papua New Guinea has a very low debt burden in general, and a negligible foreign currency debt burden. The domestic debt service burden in 2015 was K991 million and external debt service was K84 million. This comprised 7.3% and 0.6% of total expenditure, respectively.
The question is where did the commentators miss out? Where did they go wrong? It was well known and published that the National Statistical Office (NSO), is planning to publish the 2006-2013 GDP figures toward the end of March 2016. Instead of waiting for the publication, they were in a rush to use preliminary numbers published by the Department of Treasury, to criticize us.
The Government undertook positive actions over last 2 years to adjust to the changing market conditions by introducing two Supplementary Budgets in 2014 and 2015. In the 2014 Supplementary budget, the budget was adjusted to the sharp decline in commodity prices. In the 2015 Supplementary budget, it was adjusted to the collapse in the oil price and the El Nino drought. The El Nino drought closed down the Ok Tedi mine for seven months, the Porgera mine for a shorter period, and it also resulted in sharp reduction in agricultural production, for domestic consumption and exports and the cost of relief supplies to the drought affected areas.
Looking at the sectoral contribution to GDP in 2015, the year in which the PNG LNG project was in production for the whole year, shows that Oil, Gas and Mining contributed 26.7% and the traditional sectors make up 73.3%. In the traditional sectors, Agriculture contributed 16.7% and Construction at 12% are the largest ones. We can clearly state that we have a very diverse composition of GDP.
The message for Government and recent actions by it is clear towards increasing our efforts to grow the traditional sectors of the economy, mainly agriculture. There is great potential in the export markets for many agricultural products. We must invest in infrastructure to open the rural areas, to the domestic and international markets, and introduce advanced cultivation technologies. Recent project developments in some of the most remote areas, have shown that local farmers can adopt and operate those technologies very efficiently.
The next subject that the commentators were criticizing us is under the Central Bank control and management of the Balance of Payments and the Foreign Exchange Market.
The Balance of Payment went through a change in 2014. In the first four years 2010 to 2013 the Current Account recorded a deficit of K14.7 billion, mainly as an outcome of the construction of the PNG LNG project, all of it funded by capital inflows. In 2014 and 2015 the trend reversed, after the PNG LNG project construction was completed and in May 2014 it started exporting. For 2014 and 2015 the Current Account was in surplus of K19,086 million and the Capital Account was in a deficit of K20,882 million. This will continue for as long as the PNG LNG Project is using the Accelerated Depreciation Allowance, which exempts it from taxes on profits. At the present the domestic payments by the PNG LNG project are operating expenditures, royalties and development levies to landowners and Provincial Governments, paid on the Well Head value of the output, and dividends.
All mining and petroleum projects have a Development Agreement, which allows them to retain in their off shore accounts, sufficient amounts of foreign currency to serve their known off shore liabilities. The only payments expected on shore are, operating costs, tax liabilities, royalties, development levies, and dividends payments to domestic shareholders.
As of 2012, following the sharp decline in commodity prices, the foreign currency inflows were lower than the outflows. The excess in demand for foreign currency on the supply, resulted in the depreciation of the currency and a loss of foreign currency reserves.
The Kina exchange rate depreciated by 34.7% from April 2012 to May 2016, from US$0.4845 to US$0.3165 to the Kina. Despite the commentators views, the depreciation of such magnitude is a clear reflection of the supply and demand situation, and reaffirms the characteristics of a floating exchange rate regime. Some commentators argued that the kina should be freely floating to reach a market clearing rate. What is this rate? Given the fact that PNG is an import dependent country, the kina has depreciated significantly to date, and we know that the supply and demand responses to the depreciation of the kina are low, it is very difficult to know what exchange rate will clear the market.
From April 2012 to May 2016, the foreign currency reserves declined by more than US$2 billion to US$1.7 billion. Given the very low external debt for Government, this decline in reserves reflected the intervention by the Central Bank to support private sector FX demand. The Central Bank has to continously balance the foreign currency needs of Government, private sector demand and ensure it holds adequate level of reserves. The current level of reserves is sufficient for about 10 months of total and 15 months of non-mineral import covers.
At the present, there is a queue in the foreign currency market of not served orders. What are the prospects for improvements in the FX market? The resumption of Ok Tedi mine operations as of the 1st March 2016, with a monthly inflow of around US$40 to US$50 million, combined with Lihir’s increasing production and exports, will have a meaningful contribution to the reduction in the queue. There are positive signs of increased production of agriculture exports and foreign exchange inflows. Meanwhile, the Government and the Central Bank are seeking foreign currency facilities from offshore sources for budgetary financing and to support the foreign exchange market. In addition, the commencement of one of the major pipeline projects like the Penyang LNG by Exxonmobil will turn the situation around.
Finally, let me say that while there are issues and challenges we face in the short term, the medium to long term prospects and outlook for PNG economy are positive and strong. The Government is in control and managing and needs the support of private sector, donor partners, and commentators need to base their criticisms on facts, and not on hear say and social media. And I hope I have clarified some of the issues that have been subjects of recent misrepresented criticisms.
Thank you all and hope you enjoy the forum.
Speech by Mr Loi Martin Bakani, CMG Governor, Bank of Papua New Guinea Launch of Strategic Plan 2016-2020
Mr Loi Martin Bakani, CMG
Governor, Bank of Papua New Guinea
LAUNCH OF STRATEGIC PLAN 2016-2020
Today’s official launch of the Bank of Papua New Guinea’s Strategic Plan for 2016 to 2020 marks the Bank’s coming of age.
We have come a long way since the introduction of the first Strategic Plan back in 2005. Before that initial Plan was developed and implemented, we had the Central Banking Act 2000 to tell us what our job was – to meet the Bank’s four statutory objectives. But we didn’t have any clear program of improvement or set of priorities to help the Bank achieve those objectives in a logical and streamlined manner.
In fact, many of you will recall the Bank did not have mission, vision or values statements until those vital elements were developed as part of the first Strategic Planning process. Certainly, their introduction has led to a fundamental shift within the Bank to create a culture of continuous improvement. These statements give us strong guide to help us shape the Bank’s future and enable us to make good judgements about our work in meeting our responsibilities. And they form the foundations of our strategic plans.
Fast forward to the implementation of the Strategic Plan 2012-2015. Over the past few years we have taken a number of significant strides towards achieving our vision. The implementation of the National Payments System is a great example of how a major initiative marches forward across several years to meet strategic milestones.
The seeds of the NPS were sown in 2012 with the recognition that PNG needed to embrace electronic banking. This is an example of where a strategic initiative helps us achieve more than one key objective. Firstly the National Payments Systems project leads to meeting one of the Bank’s cornerstone mandates – in this case promoting an efficient national and international payments system. At the same time it is working to achieve our vision – making a distinct and valuable contribution to the economic well-being of Papua New Guinea. Plus in so doing it moves us towards meeting the mandate of promoting macro-economic growth in Papua New Guinea.
The NPS is a very good illustration of how a strategic initiative develops to implementation. KATS, the Kina Automatic Transfer System part of the NPS, was born in 2012, with the consultative planning phase – establishment of a working group with members comprised of BPNG staffers, commercial bank representatives and key Government department, system software functionality agreed, the drafting of the legislation to give legal force to the initiative.
In 2013 we celebrated a major milestone – the KATS roll out. With this phase under our belt, BPNG and commercial banks could implement electronic inter-bank funds transfer and facilitate Real Time Gross Settlement.
2014 saw the achievement of the next phase of the NPS strategic project – enhancing the Banking Services System and introducing cheque truncation which has dramatically improved cheque clearing, giving customers quicker access to their cleared funds.
Through 2015 we continued our focus on encouraging electronic banking, a key driver for the NPS strategic initiative, by launching Direct Credits. Customers are now able to send a payment instruction to their commercial bank for payment to a payee. That bank then credits the payee’s bank account and enables the payee to access cleared funds usually that same day.
With this capability, BPNG’s payments processing is in the same league as other developed countries.
Of course there is more improvement and innovation to come. The new Strategic Plan will lead us towards National Payments System enhancements, including a national card/mobile switch, improved remittance facilities and a number of other initiatives.
In a similar vein we have worked on a host of other strategic initiatives over the past few years, such as the various Data Warehouse developments and organisational budgeting, in line with the 2012-2015 Strategic Plan. Again, some of these programs and projects will continue into the Strategic Plan 2016-2020. Harnessing suitable best-in-class technology remains a key factor in achieving the strategic objectives.
Today, thanks to the success of previous Strategic Plans, the Bank’s structure is a better reflection of our position as a contemporary central bank. Here is the evidence:
- Our governance practices are moving towards world’s best practice. We are continuing to keep a close eye on our management structure, management systems and Bank infrastructure. You will see these aspects of our organisation under the microscope as part of the 2016-2020 SP.
- In line with ‘for the advantage of the people of Papua New Guinea’ BPNG has led the way towards financial inclusion, fostering a culture where all Papua New Guineans can tap into the widening opportunities for access to banking and financial services, as well as financial education. Continuing our theme of electronic innovation, we have encouraged innovations like mobile banking. And we have expanded microfinance opportunities and sponsored nation-wide financial inclusion expos.
- Plus, the Bank of Papua New Guinea is now a respected member of the central bank community. The Bank’s leadership position in the PNG financial sector has also extended to the global stage. Our strategic planning takes into account our position in the Asia-Pacific region. We actively support other central banks in the region, through our strong involvement in the peak body SEACEN and in supplying our well-qualified staff to help with supervision projects in other countries as they do in ours.
We can rightly be proud of our progress.
But we’re certainly not going to rest on our laurels. As I said, this new Strategic Plan we are launching today represents a coming of age, a maturing of our planning process. Hand in hand with that maturity comes our responsibility to keep up the momentum of improvement.
This responsibility rests on all of us. The Strategic Plan 2016-2020 has been developed so we can enhance the achievements to date and help us continue our focus on achieving the Bank’s mandated goals and objectives. It’s a work-in-progress, building on the foundations from the previous Strategic Plan, at the same time looking towards meeting and solving new challenges.
We need to bring a stronger focus to making our key responsibilities work. For example, as the world economy changes ever faster and global money supply and demand influences our economy, we need to make sure our monetary policy and transmissions are effective.
And then there are challenges handed to us, such as the vital role the Bank will have with the establishment and development of the Sovereign Wealth Fund and activating PNG to take a strong stance in line with the rest of the world against money laundering and terrorism financing. The role of the Bank of Papua New Guinea will continue to grow, which is a strong reason we have a Strategic Plan to keep us firmly on track.
As you’ll now appreciate, the Strategic Plan 2016-2020 blends continuity with change.
Right from the start of the strategic planning process we actively sought input from people all across the Bank, from Board level to each functional group. We also took into account feedback from external reports, such as those provided by the Centre of Excellence for Financial Inclusion and from evaluation reports for FSSR and NPS.
A formal workshop, in which many of you participated, established the framework and priorities of the Strategic Plan. Some of you have had a key role in developing the Plan, to the point where it has stood up to scrutiny from an independent consultant.
Congratulations, Everyone, on all the fine work that has gone into the development of this Strategic Plan. Such an effective consultation process is a very sound foundation for the success of the Plan over the coming five years. It’s an exciting time to be with the Bank of Papua New Guinea!
Right now the spotlight is shining brightly on the newly-minted Strategic Plan 2016-2020.
As Governor of the Bank I am looking forward to acknowledging steady progress through the schedule of strategic innovations and improvements the Plan sets out.
And, again as Governor of the Bank, I am also looking forward to the ongoing commitment of the bank staff who keep our mission-critical business-as-usual activities running smoothly.
On that note, balancing our commitment to business-as-usual activities with strategic improvement, I am delighted to announce the official launch of the Strategic Plan 2016-2020.
Congratulation BPNG Board & Management.
Speech by Mr Loi Martin Bakani, CMG Governor, Bank of PNG to the International Education Agency (IEA) College of TAFE Port Moresby Graduation
Mr Loi Martin Bakani, CMG
Governor, Bank of Papua New Guinea
International Education Agency (IEA) College of TAFE Port Moresby Graduation,
Friday, 19th February 2016
Acknowledgement – Executives of the International Education Agency, Board of Directors, staff, invited guests, parents and guardians and students, and graduands of the 15th Graduation ceremony.
Let me first of all thank the IEA for the invitation to be the key note speaker at today’s important occasion marking another stage in the graduands’ educational life.
You graduands will be entering the workforce or pursuing further education at an exciting time in our young country’s history that is experiencing rapid changes. You only have to look around Port Moresby and the rest of the country to see the transformation change that is taking place.
Papua New Guinea as a nation has grown and transformed into a modern, sophisticated economy. This year, 2016, marks the fourteenth year of continuous economic growth as measured by growth in real gross domestic product (GDP), the longest streak of growth since independence in 1975. The construction of the US$19 billion PNG LNG project has transformed the PNG economy, with spin-off benefits into other sectors and place PNG on the world map as a suitable investment destination that can host world-class multi-billion dollar projects.
As a small, open and developing economy, our economic fortunes are intertwined with developments happening elsewhere around the globe. With the subdued global economic growth, volatility in international financial markets and geo-political uncertainties, international prices for our major export commodities remain low. The slowdown in China has also affected global growth.
Let me briefly outline the current state of the economy, as reflected in the main economic indicators.
Economic activity – growth in real GDP is expected to slow down in 2016 reflecting lower international commodity prices, including oil, and the adverse effects of the El Niño weather phenomenon. This resulted in lower export receipts and government revenues.
Employment – According to the Bank’s Private Sector Employment Index, over the year to September 2015, the total level of employment declined by 2.6 percent, while excluding the mineral sector, it declined by 2.8 percent. The decline reflected the slowdown in economic activity.
Balance of Payments (BOP) – Preliminary balance of payments data for the eleven months to November 2015 show a deficit of K380 million, compared to a deficit of K7587 million in the same period last year. This outcome was due to a deficit in the capital and financial accounts, which more than offset a surplus in the current account.
International reserves – The level of gross foreign exchange reserves at the end of November 2015 was US$1,910 (K5,600) million, sufficient for 10.8 months of total and 18.7 months of non-mineral import covers. As at 17th February 2015, the level of gross foreign exchange reserves was US$1,816 (K5,439) million.
Exchange Rate – As a small open economy, the exchange rate of our currency, the kina, is determined by our international trade transactions and international economic and financial developments. We are a price taker for our export products and the kina continued to depreciate against the US dollar (USD) reflecting the shortage of foreign currency in the market.
Fiscal Operations – Preliminary estimates of the fiscal operations of the National Government over the ten months to October 2015 showed an overall deficit of K2,142.5 million, compared to a deficit of K1,834.2 million in the corresponding period of 2014. This reflected higher expenditure which more than offset an increase in revenue. The budget deficit of K2,142.5 million was financed from net external borrowing of K215.6 million from concessional sources and from domestic sources totalling K1,926.9 million.
Inflation remained within manageable levels. Annual headline inflation for September 2015 was 5.8 percent.
Monetary aggregates – The level of broad money supply increased by 7.7 percent over the year to December 2015, compared an increase of 3.4 percent in the corresponding period of 2014 due to increases in credit to the public non-financial corporations and private sector combined with higher net claims on the Government, which exceeded decline in net foreign assets. Monetary base declined by 2.2 percent in December 2015, compared to an increase of 37.1 percent in the corresponding period of 2015. This was due to decreases in deposits of commercial banks at the Central Bank, more than offsetting the increase in currency in circulation.
The Government’s large budgets (expansionary fiscal policy) in recent years are aimed at supporting economic activity after the end of the construction phase of the PNG LNG project. Whilst lower revenue has impacted on the Government’s expenditure plans, it has maintained expenditure on key priority areas of education, health, law and order, and infrastructure.
The Government’s focus on free education and primary health care are commendable as it strive to address the poor social indicators in the country. Redirecting the focus of Government resources to agriculture, tourism and small to medium enterprises (SMEs) will broaden the economic base of the country, reduce reliance on imported food and create employment opportunities for the majority of the population. Serious investment in these sectors will assist in reducing the economy’s dependence on the mineral sector and increasing its resilience to adverse shocks, such as falling mineral prices or unexpected adverse weather conditions.
Let me turn to the area of financial system development. The Central Bank undertook two major financial sector reforms. The first was in 2000 as part of the structural reforms undertaken by the PNG Government to address serious shortcomings in the financial system. This was followed by reforms towards the end of 2000 to broaden the financial sector, increase competition and improve accessibility to financial services, and to create a sound and stable financial system.
The reforms in 2000 involved the following:
Banking sector – strengthening governance of banks with prudent management standards and guidelines
Superannuation funds – introduce voluntary superannuation and increase wider participation by the workforce (reduce employees to 10 from 15)
Life Insurance – introduced good governance and management practice standards and guidelines
Savings and loan societies – enhance market-oriented institutions and improved management (reduced from 100 to 21)
Major legislations enacted were:
a. Central Banking Act 2000 making the Central Bank Independent;
b. Banks and Financial Act 2000, Superannuation Act, Life and Insurance Act
c. Life Insurance Act 2000
d. Superannuation (General Provisions) Act 2000
There were other financial sector reforms:
- Exchange Control Liberalisation for ease of doing business with exchange contracts broaden to allow residents to remit more abroad (1992), restrictions on (kina) lending to non-resident companies from domestic banks liberalised in 2004, current account transactions liberalised in 2005 and capital account transactions in 2007. There are now only a few controls in place.
- Financial Inclusion towards the end of 2000s, there were further reforms striving towards financial inclusion and interconnectivity. These included:
- Establishment of Centre of Excellence for Financial Inclusion (CEFI) to promote growth of microfinance
- Reach out to the large non-bank population
- Introduced financial literacy programmes to develop inclusive financial system
- Improve National Payments System to enhance efficiency of payment system
- Introduction of New Payments System, Kina Automated Transfer Systems (KATS) – improve efficiency and safety of transactions (real time settlement for high value payments, cheque truncation, direct credits)
- Reduce incidence of fraudulent transactions
- Anti-Money Laundering & Countering Financing of Terrorism to reduce criminal use of financial system
- Establishment of a unit (FASU) at the central bank to monitor, investigate and report proceeds of crime to Police
- Passage through Parliament to enact relevant Acts
- Criminal code amendment (money laundering and terrorism financing)
- UN Financial sanctions
- AML/counter terrorist financing
- Proceeds of Crime Act
These reforms have ensured we have a sound and prudently managed financial system with a world-class payment system. I encourage you all to utilise the financial products and services offered by our financial system with institutions authorised by the Central Bank when you enter the workforce.
In line with the Government’s Vision 2050 objective of wealth creation, the Bank is driving the Financial Inclusion program under the National Strategy for Financial Inclusion & Financial Literacy 2014-2015. A key priority of the Strategy is to reach one million unbanked low-income Papua New Guineans and micro and small enterprises, with a diverse range of financial services. 50 percent of whom are to be women. The program has been rolled out with the support of the licensed financial institutions to promote the savings culture among the population. These have been facilitated through establishment of the micro finance companies and micro banks.
To enhance financial literacy of the population, the Central Bank carried out the financial education through the financial literacy program. These include visits to selected provinces to conduct the programs, schools programmes for financial products tailored to students, hosting of conferences and workshops through the CEFI. There are plans for collaborative work with the Department of Education by including it in the core curricular for primary and secondary schools.
You graduands will be entering the workforce as the country experiences a lot of development. Your training at IEA Port Moresby equips you for a working life. Equally important though is the need for you to be financially literate in managing the earnings of your labour. You must know how to budget your earnings, how to save and also how to invest. For what is the point of going to work everyday, earn an allowance or salary but struggle to get by in life with all the pressures that come with it.
You have acquired a technical skill here that has prepared you well for a working career in a competitive job market. PNG is posed to experience continuous economic growth and no doubt you will all play your part in our country’s development. But also make the effort to invest in your financial education to enjoy the fruits of your labour. You deserve that – for you as well as for your family.
In concluding, I wish you all every success in your career opportunities and best wishes for a rewarding career and a safe financial future.
Thank you for the invitation to speak and God bless you all.