PNG Government Taking Steps to transform Capital Market with regulatory Reforms
Statement
PNG Minister for International Trade and Investment, Hon. Richard Maru, as the Minister responsible for capital market of Papua New Guinea announced today on behalf of the Marape-Rosso Government to undertake various regulatory reforms to improve governance, disclosure, compliance, investor protection and create investment platforms for capital raising and investment. The Marape- Rosso Government’s focus is to make our market a world class market to improve investor confidence and for it to be a capital hub of the blue pacific.
We want to make our market to be robust and agile, in which it creates strong capital raising avenues locally by way of equities, bonds, notes, debentures, property trust and others. Our aim is to make investment avenue available for government, state owned entities, listed and non-listed entities to raise capital locally then going aboard.
A series of regulatory reforms being undertake to build capacity at the regulatory and market side. The new amendments to the exiting securities Laws will force entities doing business in PNG listed aboard are required to list on PNG’s capital. The Law will be passed in August 2023 parliament sitting. A new Takeovers & Mergers Code, and a Debt Market Structure at the market after he made several appointments of public interest directors of the exchange (PNGX).
Hon. Richard Maru said that work has already started to modernize the capital markets and to improve governance in the industry. The newly established PNGX debt market, will operate alongside the existing equity market to boost market capitalisation and investor confidence. In line with Marape Rosso Government’s aim to attract more PNG institutional investors to take part in many of our large investments in the country.
The new Takeovers & Mergers Code
The old Takeovers Code 1998 was repealed when the three new securities legislations, Securities Commission Act, Capital Markets Act and Central Depository Act were passed by the Parliament in 2015.
For over 8 years the capital market regulator (Securities Commission of PNG) was unable to potentially regulate the ‘Takeovers, Mergers or Compulsory Acquisitions’ in Papua New Guinea. Notwithstanding the powers under the Capital Market Act 2015, the regulator was not in a position to fully embrace its powers by ensuring that the acquisition of voting shares or control of companies takes place in an efficient competitive market in the absence of Takeovers & Mergers Code.
Whilst announcing the new Takeovers and Mergers Code, Hon Richard Maru said that Papua New Guinea will now experience several potential advantages, including;
- Encouraging investment: a clear and transparent Code as ours will provide greater certainty and predictability for investors, which can encourage more investment in PNG. This can help to stimulate economic growth and create jobs.
Protecting shareholders: the new Code will help to protect the interests of the shareholders by ensuring that they are treated fairly and have a say in any proposed mergers or acquisitions.
-Promoting competition: a well-designed Code as ours will help to promote competition by preventing monopolies and ensuring that there are multiple players in key industries.
-Improving corporate governance: the new Code will help to improve corporate governance by setting out clear rules and guidelines for how companies should conduct themselves during mergers and acquisitions.
-Attract foreign investment: a robust Code as ours will help to attract foreign investment by providing reassurance to investors that their investments will be protected and that they will have a say in any proposed mergers or acquisitions.
Hon. Richard Maru further took the opportunity to commend ADB/PSDI, Securities Commission, PNGX and other stakeholders who took part in the consultative process to finally come up with the robust and very detailed Takeovers and Mergers Code for Papua New Guinea.
Debt Securities Market
Hon. Richard Maru said that PNG capital market has been an equity market for over sixteen years (from 1999-2023). Even though the new law (Capital Market Act 2015) had paved ways for wider market platforms like, derivatives, managed investment schemes and other structural debt securities, our local market has always been an equity market since its inception and had initially started from primary listing of eight ( and now twelve (12) equity stocks. With only twelve (12) listed equity securities, the market capitalisation is currently hovering at K134.5 billion with very limited movement at the market in terms of volume, turnover and velocity.
PNG’s capital market capitalisation is very low compared to other markets within the Asia-Pacific Region. Our market has been staggering due to no proper market information, lack of investor confidence, domestic liquidity, market support, and variety of financial products on the market and other economic factors. This has positioned our market to be highly segmented and illiquid.
The introduction of debt securities in our local market will support the government’s reform agenda to diversify PNG economy beyond extractive industries by providing potential investors an alternative financial instrument to mobilize private sector financing.
Hon. Minister acknowledges the efforts put in by International Finance Corporations (IFC) through the private partnership program with PNGX (Stock Exchange) to develop the new debt market rules. The new rules known as Debt Securities Market Rules (Dinau-Money Rule) is designed specifically for intuitional investors only to issue whole sale corporate bonds. That means, large private companies, listed entities and State-Owned Enterprises (SOEs) are eligible to raise capital for domestic investment. It will make easier for SOE’s to raise funds domestically then sourcing fund aboard or engaging other government support.
IFC have done the same with South Pacific Stock Exchange (Fiji) and they are in operational now. The initiative will create an avenue for capital raising in the form of debt securities then equities. As in our market, Bank South Pacific Limited (BSP Group) has tried it before in 2012 by issuing the unsecured subordinated Notes (BSPHA) at the offer price of K25, 0000.00 per note and its maturity was successful as in 2017. At the least, we’ve tried and experienced huge liquidity flow which significantly increased market size.
The issuance of debt securities in our market now will possibly make Port Moresby at least as attractive a centre for PNG firms to raise debt and equity capital as is Sydney. It acknowledges the competitive advantages of PNG in that firms can achieve greater visibility and investor interest locally than in Australia, the “home base” of PNG investors and the absence of currency risk investing in PNG-by-PNG investors.
Appointment of public interest directors at PNGX
Hon. Richard Maru further announced that he had revoked the appointment of Mr. Benny Popoitai as a public interest director at the exchange (PNGX) and in turn appointed Mr Robin Fleming and Dr Solomon Awili as pubic interest directors pursuant to Section 12(1) of the Capital Market Act 2015. The changes were done in consultation with Mr Benny Popoitai as he (Popoitai) is committed to his role as director of financial analysis and supervision unit within BPNG.
Mr Fleming has been vocal in our banking industry for over 45 years. He was involved at executive committee level in development and execution of strategic direction and operational planning of Bank South Pacific (BSP) as CEO. Mr Fleming was also a member to certain other financial agencies including, BSP Financial Group Ltd, BSP Life Fiji Ltd, BSP Finance Cambodia Ltd and director to all BSP Group subsidiaries.
Dr Awili is a senior lecturer and currently heading the Banking and Finance Division at UPNG. He is highly qualified researcher, academic, consultant and motivated professional. Dr Awili has a 23 years’ experience in public sector, industry executive management experience both in PNG and overseas.
Minister Maru welcomed the two new directors and further added that both Mr Robin Fleming and Dr. Solomon Awili have wealth of experience within the capital market sector to guide and will become a key role player in the development of our market. Mr Fleming and Dr Awili as both being a distinguished person within the PNG financial sector, their appointment adds value, credibility and public confidence to our market. Minister Maru further encourages all stakeholders within the industry to work closely with the appointees for further market developments.
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