Papua New Guinea’s economy needs progress on resources projects [opinion]

Waiting for the announcement of Papua New Guinea’s next resource project is taking a toll on the economy. President of the Port Moresby Chamber of Commerce and Industry, Rio Fiocco, shares with Business Advantange PNG what this means for businesses of every size.

POMCCI’s Rio Fiocco. Credit: Rocky Roe

As we enter 2020, we’re still awaiting news of a gas agreement between the government and developers over the ExxonMobil-led P’nyang LNG project.

Given the infrastructure that P’nynag will share with the Total-led Papua LNG project, it would appear neither project will proceed until this agreement is finalised.

Even if the P’nyang deal is announced, that’s still not going to mean we’re going to see dollars flowing into the economy immediately. The companies involved still have to do the design work, which will take about 12 months, before we see any boots on the ground.

What an announcement will do, of course, is give the private sector confidence that the projects are proceeding, or are almost certainly going to proceed to development. Business can then reinvest, acquire more stock, start training more staff and gear up for them.

‘PNG is still very much an economy that’s driven by the mining and oil and gas sectors.’

The other project to mention is Wafi-Golpu. If the government can’t cut a deal with ExxonMobil, then they need to quickly get on and cut a deal over Wafi-Golpu, and get that project moving.

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This will immediately bring in foreign exchange, because they’re ready to start the early work. This is badly needed, as there’s no new foreign direct investment coming into PNG at all, in any sector, at the moment.

Diversifying the economy

Unfortunately, PNG’s economy is still very much driven by the mining and oil and gas sectors, and agriculture runs a long way back as a third.

We need to diversify PNG’s economy, and the Marape government is trying to do that with its pronouncements to put more emphasis on agriculture, the Small and Medium Enterprise (SME) sector and tourism.

‘We’re advising our members to be cautious on any expansion plans until we see definitely what is happening on these projects.’

To expand these sectors, one needs capital and people with the necessary experience, skills and training. Sadly, PNG lacks all of those. So, we really need the income coming in from the current projects to be wisely spent and invested in diversifying the economy.

Tightening belts

Normally, December is a busy time in retail.  If you ask our members, you’ll find that their sales were flat in December 2019. There just wasn’t much money around.

At this stage, our members are pulling down the shutters, tightening their belts and rightsizing their staffing and stock levels, as anyone would.

Unless we hear a positive announcement on one or more resources projects, there’s nothing new to stimulate the economy. Therefore, sales will remain as they are now, which is flat-to-going backwards.

We’re advising our members to be cautious on any expansion plans until we see definitely what is happening on these projects.

Reforms

The Special Economic Zone Act passed before Christmas is a positive step forward. The government has designated areas as being special economic zones for tourism, agriculture and so on. The next step is to establish an authority — and then you’ve got to have actual implementation.

Another measure that’s having an impact is the plastic bag ban coming into force on 31 January. Two big questions being considered are what alternative packaging businesses will be able to use? And how it will be sourced?

Rio Fiocco is President of the Port Moresby Chamber of Commerce & Industry (POMCCI).