Summary: Economics

Neil Perry, Senior Research lecturer in Corporate Social Responsibility and Sustainability School of Business, Western Sydney University

• A cost benefit analysis has not been performed in accordance with standard practices, therefore, the project has not been determined to be welfare enhancing for the country of PNG.

• Project benefits have been incorrectly defined and attributed to the project while the negative impacts have not been valued.

  – Gross Domestic Product (GDP) increases and employment growth are not accurate benefits of the project.

  + GDP increases are mostly delivered to the foreign company in the form of profits, not the people of PNG.

  + The benefit derived from employment in a new project is the extra wages workers receive in their new employment relative to their previous employment or value of their non-market activities (e.g. if not previously employed)

  + In terms of people who are currently not employed in the cash economy, the benefit is the extra utility they gain.

• Actual benefits to be calculated are:

a) Local taxes, fees and royalties paid by the foreign company and its foreign workers; noting that taxes paid by local workers are not benefits as they represent transfers from one PNG citizen to another.

b) The consumer and producer surplus of the excess electrical power from the hydroelectric plant delivered outside the mine project over a relevant time period, usually not more than 50 years.

• The ‘risks’ that have been outlined in chapter 9 and appendix 13 of the EIS are actually ‘impacts’ and the costs of these impacts should be valued and used to determine whether the benefits of the project outweigh the costs.

• These project costs are:

1. The value of alternative uses of the land including subsistence agriculture and forestry that will no longer occur.
2. All spill over costs including:

a) The net impact on members of the displaced villages. b) The livelihood impact on downstream villages and those affected by the noise and vibrations. c) The loss of biodiversity and ecosystem services experienced by the residents of PNG. d) The net cost of the likely forestry activity that will occur along new roads, including an assessment of the impact on local livelihoods. e) The cost of carbon emissions and the loss of carbon sinks from the land-use change and mine may also be considered depending on the global environmental agenda of the country.

• The economic assessment does not consider alternative uses of the land that may generate substantial income through scientific exploration, bioprospecting, or eco-tourism.

• From a corporate social responsibility perspective, PanAust should be meeting at least the minimum environmental impact assessment requirements of their home country, where cost benefit analysis has become standard practice.