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30/03/2026

In Oil & Gas and Mining, there are two very important types of agreements between a government and a foreign company:
Production Sharing Agreement (PSA / PSC)
Concession Agreement (License System)
Understanding these is very important because they determine who really benefits from the resources — the country or the company.

1. Production Sharing Agreement (PSA)
A Production Sharing Agreement is when the government owns the resource, and the company only comes to invest and operate, then production is shared between the company and the government.
This system is based on the idea of resource ownership staying with the country. This is known as Production Sharing Agreement

How PSA works:
Foreign company pays for exploration and development. If no oil/gas/minerals are found → company loses its money. If resources are found → production starts.
Production is divided into: Cost Oil / Cost Recovery → Company recovers its costs Profit Oil → Shared between Government and Company.
Government may also collect:
Royalties
Taxes
State participation
Landowner royalties/equity
Example split:
40% Company (cost recovery)
Remaining 60% profit split:
Government 35%
Company 25%
In PSA, the Government and country usually earn MORE.
Countries that use PSA:
Indonesia
Malaysia
Qatar
Oman
Many African countries
2. Concession Agreement (License System)
This is the older system used in many mining and oil countries.
This is known as
Concession Agreement
Under this system:
The company is given a license or concession area
The company owns the oil/minerals once extracted
Government mainly earns from:
Taxes
Royalties
License fees
The company controls production and profits
This system was widely used during colonial times and still used in many mining agreements.
In concession system, the company usually earns MORE than the country.
Which Benefits Landowners and Government More?
Production Sharing Agreements benefit the Government and Landowners more because:
Government gets production share
Royalties can be built into agreement
Landowners can receive equity
More transparency
Country keeps ownership of resources
Better long-term revenue
Concession Agreements benefit the Companies more because:
They control production
They control costs
Government only gets royalties and taxes
Profits mostly go overseas
Simple Example
Imagine Gold worth K1 billion is produced.
Concession System:
Royalty 2% → Government gets K20 million
Tax maybe K100 million
Company keeps the rest
Production Sharing:
Government share maybe 50% → Government gets K500 million
Then taxes + royalties on top
Big difference.
Very Important Conclusion
If a country wants to truly benefit from Oil, Gas, and Mining, the best systems are:
Production Sharing Agreements
State Equity Participation
Landowner Equity
Sovereign Wealth Funds
Countries that became rich from resources (like Norway, Qatar, UAE) did NOT use simple concession systems — they used systems where the country kept ownership and shared production.

22/02/2026

WHY BANKS SEE PNG SMEs AS HIGH RISK
PART 3: REAL EXAMPLE – HOW TO SET UP A BOARD PROPERLY

Last week we talked about governance theory.
This Week, we use a real PNG example.

Let’s imagine:
👉 Moses runs a trade store in Mt. Hagen
Annual turnover: K180,000

He wants a K200,000 loan to expand.
The bank asks: “Who governs this business?”
Moses says: “Mi yet tsl.”
🚩 Risk alert.

Now let’s fix it.

STEP 1: DECIDE YOU ARE MOVING TO STAGE 2
Moses realizes:
✔️Money is increasing
✔️Relatives are asking more
✔️Stock sometimes disappears
✔️He withdraws anytime

He says: “I need structure.”
This decision alone changes everything.

STEP 2: SELECT 3 INTERIM BOARD MEMBERS
Very important:
❌ Not your best drinking friend
❌ Not someone who always agrees
❌ Not someone who needs money

Choose people who:
✅ Have good reputation
✅ Understand business or finance
✅ Can challenge you respectfully
✅ Have no criminal issues

Simple Structure:
1️⃣ Chairperson – mature thinker
2️⃣ Treasurer / Finance Advisor – good with numbers
3️⃣ Community / Independent Member – balanced person

You (owner) remain:
✔️ Managing Director
✔️ Majority shareholder (100%)

STEP 3: DRAFT SIMPLE BOARD RESOLUTION
You do not need 40 pages.

Just prepare:
📄 Document 1 – Board Appointment Letter
Names
Roles
Term (1–2 years interim)
Meeting frequency (once per month)

📄 Document 2 – Simple Constitution
Include:
✔️ How decisions are approved
✔️ Who signs cheques (minimum 2 signatories)
✔️ Profit distribution policy
✔️ Salary structure
✔️ Conflict of interest rule
✔️ Removal of board member clause

This can later be aligned with standards under the Investment Promotion Authority when formalizing directors.

Banks LOVE seeing this.

STEP 4: SEPARATE ROLES
Before: Owner = Boss + Cashier + Accountant + Decision Maker

Now:
Owner: ✔️ Strategy ✔️ Operations ✔️ Growth

Board: ✔️ Oversight ✔️ Approve major spending ✔️ Protect business direction

Accountant or Bookkeeper: ✔️ Monthly reports ✔️ Bank reconciliation ✔️ Stock control

STEP 5: INTRODUCE FINANCIAL CONTROL
Very simple system:
✔️ All money goes through bank
✔️ Two signatories
✔️ Monthly financial report
✔️ No free withdrawals
✔️ Salary fixed
✔️ Profit declared quarterly

Now if Moses applies for loan:

Bank sees:
☑️Board minutes
☑️Constitution
☑️Proper banking history
☑️Controlled withdrawals
☑️Risk perception drops immediately.

PRACTICAL BENEFITS OF HAVING A BOARD
Let’s be very honest and practical.

1️⃣ PROTECTION FROM WANTOK PRESSURE
Instead of saying: “Mi Hard lo givim.”
You now say: “Board Ino approve.”
Pressure reduces.

2️⃣ DISCIPLINE IN SPENDING
Before: Buy vehicle emotionally.
Now: Board must approve.
Impulsive spending stops.

3️⃣ STRONGER BANK RELATIONSHIP
When banks see governance, they think long term.
Institutions like:
✔️BSP
✔️Women’s Micro Bank
✔️National Development Bank

All assess risk based on:
✔️ Control systems
✔️ Leadership structure
✔️ Financial transparency

Governance directly improves your creditworthiness.

4️⃣ PREVENTS INTERNAL COLLAPSE
Many PNG SMEs don’t fail because of competition.

They fail because:
❌ Owner misuse
❌ Family interference
❌ No reporting
❌ No accountability

Board structure reduces internal collapse risk.

5️⃣ PREPARES YOU FOR BIG MONEY
Donors and institutions do not fund: “One man business.”

They fund:
✔️ Structured entities
✔️ Governed companies
✔️ Transparent systems

If tomorrow you want:
K300,000
K500,000
K1 million

Governance must already exist.
Not after.

COMMON FEAR: “They Will Steal My Business”
Let’s be clear:

Interim Board:
❌ Does not own shares
❌ Cannot remove you
❌ Cannot take profits
Unless YOU give shares.

Governance is protection — not takeover.

REAL PNG TRUTH
In village life: Big decisions are never made alone.
There are elders. There are witnesses. There is structure.

Business must follow the same principle.

FINAL MESSAGE

If your SME is above K100,000 turnover and you still operate alone —

✔️You are not small anymore.
✔️You are simply unstructured.

Small business + governance
= Fundable SME

One-man show
= High risk

For those who need guidance and wish to change your business and Company settings, do not hesitate to contact us via 📮[email protected] or 📳WhatsApp 81761316






15/01/2026

10 Simple Steps to Start a Small Business in Papua New Guinea (PNG)
*****

1. Think of a Business Idea
Choose a business idea based on what people need and what you’re good at. Make sure there’s a demand for your product or service in your area.

2. Write a Business Plan
Create a simple plan that explains what your business will sell, who your customers are, how you will advertise, and how much money you expect to make and spend.

3. Pick a Business Type
Decide if you want to run your business alone (Sole Trader), with a partner (Partnership), or as a company (Company). Companies are more official but need extra paperwork.

4. Register
Register your business name or company with the Investment Promotion Authority (IPA). Make sure the name is unique and fits your business idea. They have different fees and compliance requirements.

5. Get a Tax Number (TIN)
Apply for a Tax Identification Number (TIN) from the Internal Revenue Commission (IRC). This number is needed to pay taxes properly. If it is your first time, they'll tell you to register an individual TIN under your name, and a non individual TIN under your company name.

6. Open a Business Bank Account
Open a business bank account with a bank like BSP, Kina Bank, or TISA, NBC, Credit Bank. etc.This keeps your personal and business money separate. Different banks have different SME loan requirements.

7. Apply for Licenses and Permits
Some businesses need special licenses, like a trading license from your local town authority. Check what you need for your type of business.

8. Follow Employment Rules
If you plan to hire workers, make sure you follow PNG labor laws. This includes fair pay, work hours, and signing up for superannuation (retirement savings).

9. Keep Track of Money
Set up a system to record your earnings and spending. You can use tools like Excel, Xero, or QuickBooks to keep your finances organized. If you want to learn, let me know.

10. Advertise and Start Your Business
Spread the word about your business! Use posters, social media like Facebook, and word-of-mouth to let people know what you offer. Paid ads on Facebook are way better than others.

Starting a small business in PNG is easier when you plan well and follow the rules. With the right steps, you can build a strong and successful business. Hope you found this helpful. If you want to learn more or attend a small business course, comment your email address below and we'll send you more information. Blessings 🇵🇬

Address

Papuan Compound Lae
Lae
411

Telephone

+675 7296 6463

Website

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