PNG moves to restrict foreigners owning shares

THE Papua New Guinea government has moved to limit the operations of foreign companies and individuals in its economy.

It has amended the Takeovers Code to include a new, undefined "national interest" test that its Securities Commission must apply to the acquisition of any shares.

The new restriction says that the commission "shall issue an order preventing a party from acquiring any shares, whether partial or otherwise, under this code if the commission views that such acquisition or takeover is not in the national interest of PNG".

In a note on the change, Norton Rose Fulbright lawyers Anthony Latimer, Steve Johns and Steven Moe warn that the new amendment "has the potential to discourage foreign investment in PNG companies and is likely to have a negative impact on the share price of such companies".

Tevita Gonelevu, chief executive of Fiji Television, the owner of PNG's national TV broadcaster, EMTV, said senior ministers had discussed the government's intention of limiting the foreign ownership of media.

He said: "They would be enacting a law, something like the Fiji Media Decree, where (the media) would be majority owned by locals."

This would affect every major mass media organisation in PNG, except for the government's radio broadcaster, the National Broadcasting Corporation.

It would concern not only EMTV -- until 2005 owned by the Packer company Publishing and Broadcasting -- but also the two daily newspapers, the 44-year-old Post-Courier, 63 per cent owned by News Corp (publisher of The Australian) and The National, owned by Malaysian conglomerate Rimbunan Hijau, and three FM radio stations owned by Fiji Communications.

The Norton Rose Fulbright paper says of the new "national interest" test for all share purchases: "There are no guidelines or formal tests for determining what is in the national interest of PNG or when a takeover or other acquisition of shares will be deemed not in PNG's national interest. In short, the Securities Commission is left with a wide discretion to decide when or if a takeover is not in PNG's national interest."

The amendment has already been used to block one high-profile transaction.

The government has barred blue-chip Malaysian agribusiness Kulim from extending its stake in New Britain Palm Oil (NBPOL), PNG's leading rural corporation, from 49 per cent to 69 per cent for about $250 million.

PNG Trade, Commerce and Industry Minister Richard Maru claimed in announcing the block on Kulim that 90 per cent of the economy was controlled by foreigners. "As a responsible government we're going to take some very drastic steps to create more opportunities for our own citizens to enjoy the wealth of our nation."

He said not only had the government blocked Kulim's move to lift its investment, but it would "ask Kulim to sell down some of its shares to the respective provincial governments where the assets of NBPOL are located".

The new national interest test applies to any company, domestic or foreign, registered under the PNG Companies Act, that is listed on any stock exchange or has assets of more than 5 million kina ($2m), more than 25 shareholders and more than 100 staff.

The amendment prohibits anyone involved in the acquisition from taking any action that is perceived as contravening an order made by the Securities Commission.

Mr Maru said that in "sectors of national interest", including agriculture, "only Papua New Guineans, or over 51 per cent nationally owned companies, will be allowed to operate".

The Australian