Interview: Nathaniel Ho
What is your outlook for Papua New Guinea’s retail sector in the coming 12 months?
NATHANIEL HO: Global markets will remain volatile in the latter half of 2019 and likely beyond. We have not seen certainty since the US triggered a trade war with China, which has dealt a blow to consumer confidence. The situation is hurting both manufacturers and retailers, and is causing a slowdown not only in the Chinese economy, but has impacted smaller economies as well. In PNG’s retail sector we are seeing weaker consumer sentiment, lower disposable incomes, subdued spending on discretionary items and growing competition. We have witnessed up to a 20% decline in most retail businesses in the past six months, and we foresee a similar trend for the next 12 months, as no major events or activities have been organised in PNG. However, we have also seen foreign-owned retailers enter PNG due to the global economy slowing down. These retailers have encountered trade difficulties in other countries and migrated to PNG for new opportunities, which has created more competition. Another major issue is the scarcity of foreign currencies, as it affects the prices of not only imported commodities but also local products that use imported ingredients. We would like to see the economy pick up again, which would result in more retail demand.
Where do you see opportunities for more retail investment outside Port Moresby?
HO: PNG is still categorised as a developing country, with Port Moresby being the main market for investors. One of the challenges to doing business outside the capital is the costs associated with unreliable shipping and road transportation. Coastal and international shipping is often expensive, which in turn increases the costs of certain products.
PNG’s road infrastructure is a challenge. Road links are limited and most require immediate maintenance. Such issues make various parts of the country difficult to reach. More infrastructure development will therefore lead to more business opportunities.
We have to think outside the box. Lae, as the second-largest city in PNG, is one of the most interesting areas for expansion. We also see the Highlands Region as one of the most promising for the retail sector, as 39% – or about 2.8m – of the population lives in the area. The region is also less developed, giving investors more project opportunities to cultivate untapped areas. Development creates employment, which leads to a better quality of life. As income and formal employment rise, we will start to see a growing preference for formal retail shops, rather than informal markets.
To what extent do you see potential for the development of more shopping malls in PNG?
HO: Vision City is Port Moresby’s largest mall and has been highly successful. On the back of this, we see substantial potential for more modern malls and other retail outlets in PNG.
One of the key factors emphasised during commercial property development is the question of how many new people you can attract. Currently, Vision City remains the safest entertainment and shopping centre for those within a 15-km radius of Port Moresby. As such, it continues to attract many shoppers. We aim to create smaller-scale developments in the form of a satellite town that will consist of a service station, town homes, wholesale services and a shopping centre with space for 15-30 firms. We hope this will be realised by 2021.
The PNG retail market has traditionally enjoyed strong commitment from retailers. However, recently many have taken a “wait-and-see” approach to investment, which has likely been a ripple effect of the announcement earlier in 2019 that the government would introduce new laws targeting foreign firms.
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