A high-priority marine industrial zone project breaks ground in Papua New Guinea

 

More than a decade in the making, the construction phase of the Pacific Marine Industrial Zone (PMIZ) project in Madang Province now looks set to get under way in Papua New Guinea.

The main impetus behind the zone is to transform PNG into the largest tuna processing and canning hub in the Asia-Pacific region, eventually overtaking the Philippines and Thailand. Current estimates indicate that the zone could increase PNG’s annual tuna catch from $1.35bn to $2.7bn, according to comments made during the 2015 Pacific Tuna Forum.

Activity at the zone could also be bolstered by a proposed government policy, first launched in 2015 by Mao Zeming, the minister for fisheries and marine resources. Once implemented, the policy will require that all fish caught in PNG waters be processed on shore. Yet the ambition behind the zone extends to more than just boosting the country’s annual tuna catch. In addition to 10 canneries and other port facilities, PMIZ will eventually house a mixed-used development, with 115 ha of space set aside for residential and commercial operations. The zone will also benefit from a more efficient and cost-effective port complex on the Madang Lagoon.

A High Priority

According to statements made by Richard Maru, the minister for trade, commerce and industry, PMIZ is the government’s highest priority. As such, in April 2016 Maru presented a commencement order to the contractor awarded the project – China Shenyang International Economic and Technical Corporation (CSYIC) – to ensure the construction phase is finished in a timely manner.

Overseeing the project is PNG’s Kumul Consolidated Holdings (KCH), which is ultimately responsible for project delivery. China EXIM Bank is providing 78% of funding through a concessional loan agreement, with the government of PNG supplying the other 22%. The project is estimated to cost $235m in total, with the construction phase – scheduled for completion in November 2016 – costing around $95m. Any additional necessary funds will be supplied by KCH.

Benefits

According to comments made by Peter O’Neill, prime minister of PNG, the completed 100-ha zone is expected to bring in between $2bn and $4bn per annum and employ up to 30,000 people. It will also speed up transport and reduce freight costs and congestion at the city of Lae’s wharves.

Beyond canneries, companies will also be able to carry out operations such as value-adding and on-shore processing by making use of the zone’s modernised wharf and updated infrastructure. Indeed, PNG-sourced products currently shipped elsewhere for processing, such as cocoa, coffee, coconut and seaweed, will instead be processed at PMIZ. It is expected that this will create economies of scale, as shipping firms will be able to pick up more and diverse types of cargo, reducing freight costs.

Local Concerns 

In an effort to appease long-standing local unease on various issues connected to the PMIZ project, including environmental effects and landowner rights, the government has asked CSYIC to hire local workers for the project, a request that the deputy president of CSYIC has made assurances on. In addition, in April 2016 it was announced that a new township would be built at PMIZ to provide goods and services for project workers. Speaking about the development, Maru said that PMIZ’s location, far from Madang town, made it necessary for employees to be provided with educational, medical and security facilities on-site.

Although construction is now under way, there may still be bumps in the road ahead for the PMIZ project. Because of the delay between the signing of the initial agreement six years ago and the initiation of the construction phase, additional funds may be required. However, with so much to gain, it should not prove difficult to identify new investors for what promises to be a transformative project for PNG.

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The Report: Papua New Guinea 2016

Construction & Real Estate chapter from The Report: Papua New Guinea 2016

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