Interview: Robert Nilkare
How can the main obstacles to doing business in Papua New Guinea be overcome?
ROBERT NILKARE: The main obstacles to doing business in PNG are infrastructure, law and order, and security on investment. The latter relates to the shortage of foreign currency and had been a serious challenge for the last two years, until our first sovereign bond issue provided some relief to the market at the end of 2018. However, this problem will return unless the support structure for doing business is improved.
While PNG’s growth is for the large part connected to the extractive industries, stability and inclusive growth can be achieved by diversifying the economy further. This cannot be done without infrastructure development. Agriculture is an excellent example of this, because the majority of our population directly depends on farming activities, and often work in very remote areas where it is expensive to operate. The focus needs to be a bottom-up approach that gives them the strength, governance and structure to do business in a cost-efficient manner.
Law and order is another area where improvements are necessary, and this can only be achieved with full cooperation between all players and a well-trained police and judicial force. This would enable further gains in other industries, particularly tourism.
Which sectors offer the most attractive investment opportunities in the country?
NILKARE: The extractive industries such as energy and mining will always be here, but agriculture offers the most interesting investment opportunities. There is no industry that is more sustainable or has a bigger impact right from the grassroots. The development of the palm oil segment is a successful case study, and the same strategies should lead to positive outcomes for other crops including coffee, copra and cocoa.
Opportunities also exist for investment to boost downstream processing, where the lowering of input costs is key to improving the agricultural value chain. The agricultural sector has the biggest impact on job creation, the largest role in expanding the middle class, and the most spillover effects. For instance, New Britain has seen a lot of service providers starting up on the back of palm oil development. Therefore, the government’s focus on diversification and increased self-sufficiency is promising. Tourism also has a lot of potential, but we will not be competitive enough until we make progress in terms of infrastructure and law and order. We benefit from cruise ships, surfers and Kokoda trail visitors, yet remain far from being a tourism centre due to the high cost of travel within PNG and strong competition from nearby tourism destinations.
What can be done to boost the development of small and medium-sized enterprises (SMEs)?
NILKARE: We cannot look at SMEs in isolation; we need to develop large-scale industries in order to provide SMEs with opportunities. For instance, if coffee growers in the Highlands receive infrastructure support, big corporations might return and boost the industry further, in turn leading to SME development. SMEs need to be sustained by big players, who feed the smaller companies and create flow-on effects.
Infrastructure is key to making PNG more competitive for both foreign investors and domestic players, including SMEs. A lot of infrastructure development is currently being paid for by the private sector itself, but there should be a better balance with the government providing additional support. More investments in power generation, telecommunications and roads will create more opportunities for local businesses. Cheaper and better telecommunications is a requirement for any modern business. Regarding roads, the government should prioritise the development of those that would have the greatest economic impact, such as the Highlands Highway. This will create the best opportunity for inclusive growth, including SMEs.
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