CHRIS OVERLAND
ADELAIDE – The UBS bank of Switzerland has pointed out that the multi-billion kina loan to the Papua New Guinea government to buy Oil Search shares was made according to relevant laws and in conformance with normal business and banking practice.
To the best of my knowledge, no-one is accusing UBS of acting unlawfully (at least, not yet).
The real point at issue here is that UBS essentially facilitated a K4 billion bet by the O'Neill government that the price of oil and gas and hence the value of its investment, would go up not down.
At that time, I - and many other critics of the decision to buy shares in Oil Search using public funds - pointed out that the price of oil and gas was at historic highs and thus inflating the price of the shares being purchased to a level that did not reflect their underlying long term value.
We also pointed out that the downside risks of such a manifestly speculative investment in the volatile energy market were very high, so the likelihood of PNG losing a lot of money was also very high.
Now, six years later, the critics have been proved correct and PNG has lost money that it should never have lost.
As a class, politicians are generally crap at making business decisions. This has been demonstrated repeatedly across the world and PNG's politicians are no exception to the rule.
The proposed inquiry will reveal this basic fact and, very probably, confirm that UBS acted lawfully at all times.
However, whether there were any ‘facilitators’ involved in brokering the deal, what they were paid and where the money eventually ended up will be matters of interest.
