Pacific Maritime Industrial Zone (PMIZ)

Aerial view of Madang bay and city in Papua New Guinea - Photo from Shutterstock

Pacific Maritime Industrial Zone (PMIZ)

This research reflects information available up until June 2021, it may not reflect developments after the date of assessment.

The Pacific Maritime Industrial Zone is a mega fisheries industrial project that would retain a large portion of Pacific-caught tuna for local processing. Approved in 2004, it is Papua New Guinea’s (PNG) first project following the Special Economic Zone concept. The project is situated in Bidar, Madang Province and aimed at building ten canneries to create tens of thousands of jobs and generate significant economic activity. The project was estimated to cost US$156 million, funded through a concessional loan from EXIM Bank of China and the Government of PNG. Out of the total land area of 216 ha, 116 ha is allotted for the industrial zone and the remaining 100 ha for residential and commercial use. Upon completion, the PMIZ will have up to ten tuna canneries and a host of integrated port facilities.

Project Background

Plans to develop the PMIZ as a marine industrial hub were announced in 2004 to give Papua New Guinea the capacity to add value to the tuna caught in its waters. The project was to be Papua New Guinea’s first project under the Special Economic Zone (SEZ) concept approved by the National Executive Council in 2004. It was envisaged as a private zonal authority that would operate under its own regulations. A ceremony to mark the signing of a Memorandum of Understanding and Cooperation (MoU) with China Shenyang International Economic & Technical Cooperation Corporation (CSYIC) took place on June 18, 2008, in Manila, Philippines. The MoU authorized CSYIC to represent the Government of PNG in negotiating and developing a loan package with any Chinese banks for the PMIZ project. The PMIZ project was officially launched in Madang on June 19, 2009.

In October 2010, the Government of PNG signed a general contract with CSYIC in Port Moresby, PNG. This followed a framework agreement signed between the Government of PNG and Chinese government representatives during the Chinese vice premier’s visit in November 2009, which allowed PNG to access the EXIM Bank concessional loan of US$74 million for the project. In 2015, the Government of PNG expanded the PMIZ project design to include new features not present in the initial plan. The expanded project scope included power and water supply infrastructure and further improvements to increase the size of the wharves to accommodate fishing vessels and cater to mining and agricultural export interests. In response and in line with its own policy, the EXIM Bank canceled the initial loan and proceeded to advise the Government of PNG to renegotiate a new loan of US$156 million.

Many key stakeholders from both the government and the private sector are directly involved in the planning and implementation of the PMIZ project. The key bilateral partners involved in the financing and implementation of the PMIZ are the People’s Republic of China, the EXIM Bank of China, and the Government of PNG, with the Department of Commerce and Industry (DCI) and National Fisheries Authority (NFA) as the implementing agencies. The main contractor is China Shenyang International Economic & Technical Cooperation Corporation (CSYIC), with other subcontractors involved in providing various specialized services. The primary subcontractor, Aces Ventures, is partly owned and managed by former Minister of Commerce and Industry Minister Gabriel Kapris, who was also behind securing the project’s original loan and a key force behind the PMIZ project.

Non-competitive procurement and loan conditionalities

The contract for Phase 1 of the project, construction of the base infrastructure, was not processed through the PNG National Procurement System (NPS), then called the Central Supply & Tenders Board (CSTB). Instead, the contract was awarded directly to the Chinese contractor, CSYIC, as a condition of the $74 million loan from EXIM Bank. ACT NOW, a Madang-based civil society organization, claims that 70 percent of the project’s funds are required to go to the main Chinese contractor, in this case, the China Shenyang International Economic and Technical Cooperation Corporation (CSYIC), both of which use Chinese equipment, labor, and technology. The terms of the loan also allow the Chinese contractor CSYIC to operate exempt from any “rate, charge, duty or imposition of any kind under PNG laws.” In addition, the government “irrevocably waived ” sovereign immunity for PNG in any dispute over the loan.

 

Lack of government coordination

There is a lack of clear government leadership of the project in terms of designating one lead agency to be responsible for project planning and implementation. Management of the PMIZ project has been transferred multiple times between several government departments and agencies. This contributed to confusion and delay in implementing the project. Initially, the project was under the control and management of DCI, but was moved to Kumul Consolidated Holdings in 2016. In early 2019, it was announced that the project would be moved again to MPG. As of August 21, 2020, the project is with the Department of Finance, the government agency responsible for overseeing operationalization of the Special Economic Zone Act of 2019

 

Management of project fund allocation

In 2017, the Ministry of Trade, Commerce, and industry instituted a review of the management and expenditures of the PMIZ project. The review revealed that K30 million or US$10 million had already been used for the project. Despite this, the Minister claimed that: “despite sufficient funding, the status of the 2.47km access road is unsatisfactory, including, a 400m segment of the road for which PGK5.5 million (US$1.65 million) was already paid. PGK4 million (US$1.2 million) was paid for only one item, the main gate. Survey and physical zoning remain incomplete, despite PGK2.25 million (US$0.675 million) paid to landmark valuers eight years ago.” The review further revealed that the expenses were “unjustifiable and excessive expenses.”

 

Lacking local stakeholder consultation and shutdown of local concerns

Since 2009, the PMIZ project has been disrupted by stakeholder protests over many issues, which has resulted in project delays. Generally, the protests stem from PNG’s lack of meaningful consultation with landowners and impacted community members. The announcement of the PMIZ project reportedly went forward without notification or consent of those living on the land and in surrounding communities. In addition, there is the issue of compensation for those living on the land and the reported forcible eviction of remaining residents on October 21, 2011, an issue later raised before the National Court, which was found in favor of the evicted residents. In 2015, the Department of Commerce and Industry (DCI) secretary attempted to gag some of the most vocal opponents of the PMIZ project. The DCI obtained court summons to restrain eleven of the most vocal PMIZ project opponents from organizing meetings, visiting the project site and publicly opposing the project. In July 2015, the DCI decided against further pursuing the court case and withdrew the lawsuit.

Average Transparency Score:
3.1/6
  • Not Transparent
  • Transparent
Project & Contract Phase Project Information Score Response Link to Information
Project Identification Project owner Department of Commerce & Industry Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Sector, subsector Fisheries Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Project name Pacific Maritime Industrial Zone Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Project Location Bidar, Madang Province (20 km north of Madang town) Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Purpose The development of industrial marine processing and export infrastructure facilities with favorable investment climate to encourage foreign investment including, other Pacific Island countries for processing of tuna caught in the Pacific waters, thereby creating increased employment, and income earning opportunities. This is also addressing the issues of diversifying revenue sources through downstream processing and value adding of products. Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Project description The project infrastructure and facility establishment will include the development and construction of the following components:
– A Container/Transshipment Port with International Standard Facilities,
– A Fish Port,
– Pier,
– Waste Water Treatment Facility,
– Modern Communication Facilities,
– Water Supply Facility,
– Power Plant and Fuel Depot.
– A hundred hectares (100 ha) of land for the PMIZ.
Volume 3A Public Investment Program for National Departments 2019-2023, Commerce & Industry, PP.489-490
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Project Preparation Project Scope (main output) Development of a 94.64 hectares of PMIZ; reclamation of about 5 hectares; construction and development of a container/transshipment port with international standard facilities; development and construction of fish port; construction of pier; development and construction of waste water treatment facility; development and construction of modern communication facilities; development and construction of water supply facility; development and construction of power plant; construction and development of fuel deport; procurement of equipment and materials; feasibility study, survey and technical design; and project advisory, supervision and management. https://www.canningparadise.com/thepacificmarineindustrialzone
https://actnowpng.org/content/pmiz-loan-china-terrible-deal-png
Environmental impact A number of environmental impacts are identified for the site clearance and construction phase of the project. These include:
– Degradation of water quality,
-Destruction of habitat and subsequent loss of species,
– soil erosion,
– increased runoff,
– increased risks of land spillage and eventual toxic contamination,
– Disturbance of endangered species, especially the marine species of reefs, fishes and mammals,
-Toxicity from leaching,
– Eutrophication and Dust Mitigation measures proposed include;
-siltation control using silt curtain, settling ponds and appropriate technology
-Drainage barns and settling basins for grading controls
-option for relocation of displaced population
-construction of proper accommodation and latrines
– Have an environment officer as part of the project management unit
– establish discharge regulations
– overflow controls
– Routine clean ups
– adequate treatment and disposal technology
-waste management plan
– noise and toxic substance controls
https://www.canningparadise.com/thepacificmarineindustrialzone
https://130a4068-6ab9-cff0-eb3f-e23f77fab438.filesusr.com/ugd/ec3c4a_3c2acbf0f4d1bbad77d1fcd430e6e7a2.pdf
Land and settlement impact The PMIZ project will be built on 215 ha of land; 100 ha to be used for industrial zone and 115 ha for residential and commercial use. Likely to affect about 70 families that live and work for the old plantation under the previous owners, the Catholic Church. https://www.canningparadise.com/thepacificmarineindustrialzone
https://postcourier.com.pg/govt-pursue-pmiz-project-madang/
Contact details Department of Commerce and Industry
PO Box 79, Port Moresby
National Capital District, Papua New GuineaWebsite: https://www.dci.gov.pg/index.php/en/
General Line: +675 323 9578 (9am – 4pm)
https://www.dci.gov.pg/index.php/en/
Funding sources Export-Import Bank of China (EXIM) Feasibility Study: Pacific Maritime Industrial Zone ( Government Concessional loan)
https://www.canningparadise.com/thepacificmarineindustrialzone
Project Budget Total project cost estimated at US$95 million.
– EXIM Bank loan USD 74 million and PNG Government counterpart financing of USD 21 million.
– Adjusted total project cost USD 156 million taking into consideration additional/expanded scope of works, under consideration by PRC and GoPNG.
https://www.canningparadise.com/thepacificmarineindustrialzone
Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)
http://www.treasury.gov.pg/html/national_budget/files/2019/Volume%193A.pdf
Project budget approval date – Main Agreement on project design and construction signed between GoPNG and China Shenyang Economic and Technical Cooperation Corporation on 29 September 2010
– 1st Supplementary Agreement signed 10 May 2011
– 2nd Supplementary Agreement signed 19 October 2015
– 3rd Supplementary Agreement signed on 24 March 2016 with expected start of works in April 2016.
– Despite delays in draw down of the loan, funds have been budgeted and used for the PMIZ since about 2014.
Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)
https://www.canningparadise.com/thepacificmarineindustrialzone
Project Completion Project status (current) Preparation/Construction Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)
https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
Completion cost (projected) The initial capital cost of the project was valued at approximately USD 95 million. The first phase of the project for construction was financed by the PNG Government (GoPNG) through a concessional loan (package) from China through the EXIM Bank. As part of the loan Agreement, EXIM Bank was to provide USD 74 million and the GoPNG providing the remaining balance of USD 21 million as counterpart funding for the project. By year 2015 the cost of the project has increased from USD 95 million to USD 156 million, an increase by an additional USD 61 million. This increased level of funding requirement is due to GoPNG’s expanded scope of works that includes new interests in power, water supply infrastructure, and further improvement to increase the size of the wharves not only to cater for fishing vessels but also to cater for mining and agricultural export interests. As per Supplementary Agreement 11I, project completion expected early 2019 for drawing down USD 95 million whilst discussion between PRC and GOPNG ongoing for increased level of funding up to USD 156 million.

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Completion date (projected) As per Supplementary Agreement III, Article Two: Total Construction Period 2.1, project implementation to start on April 2016 and completion expected within 33 months (January 2019)

https://130a4068-6ab9-cff0-eb3f-e23f77fab438.filesusr.com/ugd/ec3c4a_3c2acbf0f4d1bbad77d1fcd430e6e7a2.pdf

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Scope at completion – Construction of up to 10 tuna canneries and a host of integrated port facilities.
– Acquisition and development of 215 ha of land of which 100 ha to be used for industrial zone and 115 ha for residential and commercial use.
– Procurement of equipment and materials
– Feasibility study, survey and technical design
– Project advisory, supervision and management

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

https://www.canningparadise.com/thepacificmarineindustrialzone

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Reasons for project changes In 2015, the cost of the project increased from USD 95 million to USD 156 million, an increase by an additional USD 61 million. This increased level of funding requirement is due to GoPNG’s expanded scope of the PMIZ project design that includes new interests in power, water supply infrastructure, and further improvement to increase the size of the wharves not only to cater for fishing vessels but also to cater for mining and agricultural export interests. The EXIM Bank in response and in line with its own policy cancelled the initial loan and proceeded to advise the GoPNG to renegotiate the loan of USD 156 million. The work on the project is delayed pending the GoPNG approval of the new loan followed by PRC approval and subsequent execution of a new loan agreement between the two parties.

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Reference to audit and evaluation reports During the website’s latest update, no information was available publicly.
Procurement Procuring entity Department of Commerce and Industry https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
https://www.canningparadise.com/thepacificmarineindustrialzone
Procuring entity contact details Department of Commerce and Industry
PO Box 79, Port Moresby
National Capital District, Papua New GuineaWebsite: https://www.dci.gov.pg/index.php/en/
General Line: +675 323 9578 (9am – 4pm)
https://www.dci.gov.pg/index.php/en/
Procurement process – Researchers believe that procurements were in compliance with Section 7 of the National Procurement Act of 2018 that upholds international agreements/loans, procurements done in compliance with China procurement rules.
– China Shenyang International Economic & Technical Cooperation Corporation (CSYIC) pre-selected contractor

http://www.parliament.gov.pg/index.php/bills-and-legislation/view/national-procurement-act-2018

https://www.canningparadise.com/thepacificmarineindustrialzone

Contract type Design, Construct and Supply of Equipment/Materials for the Pacific Maritime Industrial Zone

https://www.pngblogs.com/2012/10/oneill-allowing-china-to-cash-in-on-png.html

https://actnowpng.org/content/pmiz-loan-china-terrible-deal-png

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Contract status (current) During the website’s latest update, no information was available publicly.
Number of firms tendering During the website’s latest update, no information was available publicly.
Cost estimate USD 95 million

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

https://www.canningparadise.com/thepacificmarineindustrialzone

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Contract administration entity Same as the procuring entity, Department of Commerce and Industry https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf
https://www.canningparadise.com/thepacificmarineindustrialzone
Contract title To the Main Contract Agreement on Design, Construct and Supply of Equipment/Materials for the Pacific Maritime Industrial Zone (PMIZ) Project-Madang, Papua New Guinea.

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

Contract firm(s) China Shenyang International Economic and Technical Cooperation Corporation

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

https://www.canningparadise.com/thepacificmarineindustrialzone

Contract price USD 95 million

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

https://www.canningparadise.com/thepacificmarineindustrialzone

Contract scope of work – Construction of up to 10 tuna canneries and a host of integrated port facilities.
– Acquisition and development of 215 ha of land of which 100 ha be used for industrial zone and 115 ha for residential and commercial use.
– Procurement of equipment and materials
– Feasibility study, survey and technical design
– Project advisory, supervision and management

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

https://postcourier.com.pg/govt-pursue-pmiz-project-madang/

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

Contract start date and duration – 3rd Supplementary Agreement signed on 24 March 2016 with expected start of works in April 2016,
– Completion anticipated in 33 months as per contract clause 2.1 (Article two: Total construction period, completion expected early 2019
– Project appeared not to have started pending renegotiation of loan for USD 156 million.

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 (un published official document)

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

Implementation Variation to contract price

The initial cost of the phase I (construction) of the project was USD 95 million. In 2015, project cost was increased to USD 156 million. An increase of USD 61 million.

– There is no new contract relating to the adjusted loan amount despite Government Public Investment acknowledgement of USD 156 million.

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

http://www.treasury.gov.pg/html/national_budget/files/2018/Volume%203%20PIP.pdf

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Escalation of contract price Details not accessible. USD 95 million for projected as per earlier concept study; USD 156 million as per approved engineering design based on increased scope.

https://www.thenational.com.pg/projects-scope-delays-work/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Variation to contract duration Completion expected within 33 months but project appears not to be on track.

https://www.thenational.com.pg/projects-scope-delays-work/

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Supplementary Agreement III between GoPNG and China Shenyang International Economic and Technical Cooperation Corporation dated 24 March 2016 ( un published official document)

Variation to contract scope Details not accessible. USD 95 million for projected as per earlier concept study; USD 156 million as per approved engineering design based on increased scope.

https://www.thenational.com.pg/projects-scope-delays-work/

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Reasons for price changes Details not accessible. USD 95 million for projected as per earlier concept study; USD 156 million as per approved engineering design based on increased scope.

https://www.thenational.com.pg/projects-scope-delays-work/

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

Reasons for scope & duration changes Details not accessible. USD 95 million for projected as per earlier concept study; USD 156 million as per approved engineering design based on increased scope.

https://www.thenational.com.pg/projects-scope-delays-work/

https://postcourier.com.pg/funding-constraints-stall-pmiz-progress/

https://www.treasury.gov.pg/html/national_budget/files/2019/Public%20Investment%20Program%20Volume%203A.pdf

 

Pacific Maritime Industrial Zone