Interview: Frank Kramer

As Papua New Guinea becomes more visible in the region, what opportunities are there for synergies with its neighbours?

FRANK KRAMER: PNG has always been a natural bridge between the Pacific and Asia. The post-independence “look north” strategy, which advocated greater engagement with Asia, changed many things here. However, there is caution about rushing to Chinese markets, and I believe Indonesia is a safer alternative because it offers similar things as China in terms of business and has a strong desire to work with PNG.

Efforts have been made to link the Indonesian and PNG economies by, among other things, creating a border corridor to facilitate immigration. Government change and other factors have made it hard to maintain continuity in agreements with Indonesian companies, but there are still opportunities to diversify collaboration. For example, connecting to the fibre-optic cable in Jayapura represents a cost-effective opportunity for the ICT sector to open up an expansive and high-bandwidth market, while strengthening the e-commerce capabilities of banks and service providers.

What challenges do you expect to face in 2016?

KRAMER: The past few years have been challenging in that companies have had the option of either lowering expectations and downsizing, or making more strategic (higher) year-on-year projections. The latter approach is the best in terms of creating a positive environment for the Papua Liquefied Natural Gas project. This project is made all the more important by the fact that supplying power to mining operations is a major hurdle for which a gas-to-electricity supply that connects the northern and southern grids is a clear solution. Hydropower is a potential alternative, but it involves high costs, and supply could become too large for demand, leading to low profits. The answer is to maintain several medium-sized gas-to-electricity projects until demand increases and the market is ready for a large hydropower supply.

In addition, a government initiative is under way that aims to assist with economic diversification in specific areas by creating free economic zones, including a tourism hub in Kavieng of New Ireland Province, an IT hub in Vanimo, West Sepik, and an industrial zone in the Western and Gulf Provinces.

How does a greater focus on renewables around the world resonate with PNG?

KRAMER: Renewable energy needs support from a sophisticated renewables sector, and this does not exist in PNG. Developing economies are now ready to trade off between the cost of infrastructure and the benefits of reduced emissions. Developed economies were in the same position a century ago, but as standards have changed, the move to renewables in the developing world cannot take place at the same speed. PNG is fortunate in the sense that it has a low dependency on coal and a small industrial base, so it is not a big contributor to emissions.

What is the economic outlook for PNG?

KRAMER: While GDP growth has fallen, the current rate is still a decent figure for an emerging economy. The government has done good work on infrastructure projects, despite receiving criticism for its budgetary policy. In the medium term, I believe that industry will be the sector that drives the economy back up, provided that the government remains stable until 2017. While resource projects are not a true reflection of GDP, large infrastructure projects and high spending are needed to reach high growth figures again. One solution would be for small and medium-sized enterprises (SMEs) to act as bridges between public and private sector activities. After all, SMEs are truly the engine room of the economy, and greater SME activity will mean higher levels of GDP.