Interview: Jonathan Seeto
What sort of debate should we see within the business community in light of the economic uncertainty that exists due to low commodity prices?
JONATHAN SEETO: We hear a lot of debate across the business community about what would create an environment more conducive to business growth and investment. When asked about what is important to business growth, a recent survey conducted by PwC of CEOs in Papua New Guinea found that the three things at the top of the agenda are: a need for more certainty over the exchange rate and foreign currency availability, improvements to key infrastructure, and better fiscal response to the current budget deficit. Over-regulation and social instability were also seen as potential threats to business growth. Debate on a wide variety of issues is not lacking; however, one thing these issues have in common is that they are external factors for businesses. It seems that there is potentially less debate and less focus on internal business drivers and how companies can react to an externally challenging environment.
Innovation and the use of technology is one area where we believe there could be greater discussion and more engagement from business. The same survey that highlighted the significant external concerns and drivers indicated that only 23% of PNG CEOs were looking to technology as a way of meeting current challenges. Beyond innovation and technology are also broader questions related to business productivity.
What other sectors besides the extractive industries could sustain economic growth?
SEETO: Setting aside some of the current challenges, there are opportunities for growth in many sectors of the PNG economy, simply because most them are starting from a low base. While most sectors would benefit from investment, agriculture and tourism are likely to have the biggest economic impact, including on employment opportunities. In agriculture, widely recognised chances for inclusive growth stem from import replacement, value-added agriculture, new or renewed investment in existing commercial crops, and renewable food resources such as fisheries. For example, less than 20% of PNG’s exports come from agriculture. In terms of tourism, PNG’s potential is unquestionable, and as we have seen elsewhere in places like Fiji, the sector has real potential to stimulate and engender inclusive growth across all aspects of society. In Fiji tourism’s total contribution is estimated at around PGK4bn ($1.4bn) per year.
What factors are key to encouraging investment and stimulating business growth in PNG?
SEETO: It is not enough that PNG is a resource rich country. From the perspective of investors, including those that already have established businesses in PNG, there are a number of other factors which contribute to making an investment attractive, such as rule of law, the government’s attitude to foreign investment, political stability, taxation, corruption, and fiscal and monetary management. Other factors often include bureaucracy, the skills and capabilities of the local workforce, and the quality of infrastructure.
Efforts are being made to address many of these indicators, including the government’s broader engagement in the region, its increased involvement in APEC – signalling a desire for greater regional connectivity – its recent acknowledgment of the need for fiscal restraint, its free education policy, its bringing tax reform onto the national agenda, and the increased budgetary allocations in infrastructure. Getting the balance right with all of these elements is challenging, particularly in the current economic climate. On the other hand, investor confidence can quickly change if there is any disconnect. The recent proposals for changes to the Land Act and the Mining Act are two instances where there needs to be a more informed debate and due process, otherwise such proposals have the potential to undermine investor confidence, albeit unintentionally.
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