The recent two-part ABC Background Briefing series “Dead Man’s Secrets” makes for compelling listening. It is the story of two men, Fego Kiniafa, former PNG Ports CEO, and Don Matheson, Australian businessman and associate of Kiniafa. But it is also a story that raises profound questions not only for PNG Ports but also for its financial backers, the Asian Development Bank (ADB) and the Australian government, through the Australian Infrastructure Financing Facility for the Pacific (AIFFP).
Kiniafa’s death in September 2022 was a tragedy. Its cause would appear to be a drunken, local fight; Background Briefing’s attempts to suggest there might be deeper forces behind the death are not convincing. But, while not related to his death, it is also not in dispute that Kiniafa received a series of unexplained and expensive gifts in the forms of cars, free accommodation in Australia, a racehorse, and dental chairs for his wife (a dentist), all allegedly facilitated by Matheson.
Don Matheson’s company received $4.3 million from the Filipino multinational ports operator ICTSI, as “professional fees” and “consultancy fees”, in the second half of 2017. This was around the time that ICTSI won a tender from PNG Ports to operate its Port Moresby and Lae port facilities for the next 25 years. ICTSI denies any link between the payments and the tender. But Matheson made a number of payments to both Kiniafa and his predecessor as PNG Ports CEO. We know this because Matheson’s banking details were leaked as part of the Panama Papers, and because of the terse bank account descriptions he helpfully used to describe his payments and purchases: “FEGOLANDCRUISER”, and so on.
Since the report was aired, the PNG PM has announced that PNG Ports will be investigated by the new Independent Commission Against Corruption (ICAC). Matheson is surely now being investigated by the Australian Federal Police (AFP) under foreign bribery legislation.
What about the AIFFP and the ADB?
PNG Ports is the biggest beneficiary of the AIFFP to date, being the recipient of a $521 million loan and a $100 million grant. After the Background Briefing program, DFAT promptly distanced itself from the scandal by saying that the allegations “do not involve Australian public finance and are historical”. This is true, but disingenuous. Few details of the AIFFP PNG ports project have been made public, but the AIFFP website highlights the upgrading of the Lae port, PNG’s largest, and one of the ports tendered out to ICTSI. Far from the claims being only of historical interest, they raise the risk that Australian-funded assets will be handed over to an operator that received its licence via an allegedly corrupt process.
The AIFFP has informed me that the matter has been referred to DFAT’s Counter Fraud and Anti-Corruption Section. That’s a good start. But it will also be important to know what happens to the Lae port upgrade and who gets to operate the port once the upgrade is complete. One reason for my initial scepticism about the AIFFP was the lack of transparency I thought there would be around the deals Australia would finance, as well as the likely lack of policy conditionality. When I look at the complete lack of detail around the AIFFP PNG ports project, my initial concerns seem justified.
The ADB is also implicated. For the last two years it has been financing state-owned enterprise (SOE) reform to promote SOE “governance and transparency”. The ADB also financed an earlier rehabilitation of the Lae port, and since then has been pushing PNG Ports to contract out the Lae port’s operations. The 2007 ADB loan agreement for the original rehabilitation committed the PNG government, within 24 months of loan effectiveness, to prepare “a time-bound action plan to develop a strategic public-private partnership model to ensure effective and efficient service delivery in the operation of the new port facilities” that its loan was financing. It took the PNG government much longer than 24 months, and the ADB was not involved in the actual transaction, but eventually the envisaged public-private partnership became the contract awarded to ICTSI.
The ADB, like DFAT, says it has a “zero tolerance policy” in relation to corruption, one which covers ongoing and completed projects. The port – the upgrading of which was financed by the ADB – is now being operated, as a result of an outsourcing approach the ADB encouraged, by a company over which a cloud of corruption allegations now hangs.
Corruption is a fact of life in all countries, and it is generally more prevalent in poorer than in richer ones. But when it is uncovered, it cannot be ignored. The ICAC and AFP investigations will be important; but so too will be the responses of the AIFFP and the ADB.
There are multiple other very similar examples across the region but zero accountability – especially involving the ADB. The worst is probably not even this one, a look at the similar investment in Vanuatu tells a potentially even more frightening story in terms of poor practices of the development partners. The ADB head of infrastructure at the time has now left the ADB – but what is more worrying is that the they deliberately turned a blind eye even when warned repeatedly about many of their investments during this period.
Hi, in this article the fact check does not implicate AIFFP with the case of corruption with PNG Ports. The AIFFP was established on 1 July 2019, somewhat 2 years after the contract was signed with PNG Ports in 2017 (ref. 2). Clearly cannot see the nexus between the two. Please explain as I see no connection. Thank you Stephen.
The following are excerpts:
Ref. 1 ‘The AIFFP was announced by former Prime Minister Morrison in November 2018 and became operational on 1 July 2019’, (ref. https://www.aiffp.gov.au/about)
ref. 2 ‘The ABC’s Background briefing and the OCCRP revealed questionable payments involving then top PNG Ports officials Fego Kiniafa and Stanley Alphonse around the time a major contract was awarded to a multinational ports operator, ICTSI in 2017’ (ref. https://islandsbusiness.com/news-break/marape-orders-corruption-watchdog-to-investigate-png-ports/)
Hi, thanks for your comment. The answer is in the sixth paragraph. The allegations on the ABC program cast doubt on the integrity of the bidding process that led to the awarding of the PNG ports operator contract to ICTSI. One of the ports that ICTSI now operates in PNG is the Lae port. And the Lae port upgrade is, I understand, is the biggest component of the AIFFP PNG Ports investment. So, my concern is around what will happen to the Australian-funded upgrade of Lae port once it is complete. Will the upgraded port be operated by ICTSI? Will there be another bid? Will it depend on the outcome of the inquiry? Hope this clarifies.
Good summary and questions… the ADB converted itself, at least in PNG in the 2010s ( notably under the former Country Director) into being exclusively a transport financing platform, although in the past 3 or 4 years it’s diversified with some social sector and of course budget lending. This transport financing was almost exclusively to Chinese contractors as featured in papers by Pete Connolly; although Lae Port was of course China Harbour, PNG Port’s engagement with ICTSI and with Matheson took a different direction. Of course, Matheson had a finger in multiple land and prospective construction pies and certainly not exclusively the ports, eg a new HQ- township for Jiwaka on an agricultural estate etc. Questions certainly need to be asked and answered in Canberra and Manila also. There is a concern up here that governance on issues related to PNG are set aside down south to avoid ruffling feathers, and pushing some leaders towards other camps. That won’t wash with the PNG public though, which expects high er standsrds, and not just opportunism, compromise or real politic from GoA… including when it comes to PNG leaders committing abuse ( money laundering etc) with Australia, or lawyers or others wanted in PNG but residing in Australia not being promptly delivered to the the justice process up here.
With Fega and his protagonist I hear strong indications that it was more than a drunken dispute and that protagonists felt feared that something was owed and undelivered, but we’ll probably never know that.