Viewpoint: Somu Bhattacharya
Manufacturing currently contributes around 9% of Papua New Guinea’s total GDP and has a multiplying effect on other sectors, which is good news for economic growth in PNG as a whole. At the same time, however, operators would like to see a stronger commitment from the administration to ensuring that this growth remains sustainable. For instance, the infrastructure network currently hinders growth and needs to be overhauled.
Moreover, more needs to be done to curb parallel imports, which reportedly account for 10-15% of the country’s entire beverage industry. The soft drinks segment is not alone in suffering from the effects of unfair competition. The food industry as a whole faces similar challenges and therefore, it is high time that we boosted our efforts to fight the scourge of parallel imports. This can only be done by strengthening the existing regulatory framework, as other countries in the region – most notably the Solomon Islands – have already demonstrated. In PNG industry leaders say a lack of political will, rather than a lack of capacity, is the primary challenge.
PNG has been largely successful in controlling the illegal import of automotive products. The same model could be followed to assist local manufacturers in other fields, particularly within the food and beverage industry. Traceability is becoming increasingly important to the functioning of many industries these days, including the soft drinks segment. However, it is pointless to invest so many resources in a business if products clearly displaying a different point of origin are allowed to circulate freely in the market, even though it may say on the label that this should not be the case.
Similarly, distributors of parallel products, which usually originate in Asian markets, have established businesses in prime locations such as Port Moresby, sometimes next to factories providing employment for thousands of people, as well as state tax revenues. Manufacturers in PNG need more than tax holidays to continue to operate in the market – they need a level playing field.
Although the government plays a key role in regulating the market, I believe that the private sector can also contribute towards this effort by supporting the work of international risk assessment institutions. They could identify exactly where the weak links within the system are and propose a new structure to improve monitoring in the long run. At the same time, we require the government’s support, as it is not appropriate for a private company to fund research that should benefit the market as a whole, rather than a single firm’s own interests.
The negative perception of PNG as an investment destination, which is usually undeserved, is due in part to its weak regulatory framework, which often leaves enterprises exposed to unfair competition. The high cost of doing business exacerbates this situation. Furthermore, parallel imports contribute to social as well as economic problems. These traders could be importing products that have been compromised and do not follow good manufacturing practices for the food and beverage industry. In the remote possibility of any consumer complaints, local manufacturers will bear the consequences, even if the product was bottled elsewhere. While the likelihood of this occurring is slim, it should not be entirely discounted. As such, including the importer’s details on the label would help improve traceability.
These challenges aside, manufacturing will remain vital for the country’s growth in the coming years. Taking into account the persistence of low oil prices in the market, talks about diversification have been gaining momentum, which is good news for everyone. Recent investment has been directed towards developing automated production in areas such as Port Moresby and Lae, where industry has been poised to contribute to long-term development. That shows the level of continued commitment that many manufacturers operating in the market have to PNG.
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