Interview: Jonathan Seeto
How do you assess the current state of the business climate in Papua New Guinea?
JONATHAN SEETO: As I reflect on conversations with business leaders in various forums, and the surveys that PwC undertakes throughout the year, unsurprisingly the resounding theme has been one of challenge. Nevertheless, despite all the apparent challenges, we have observed that CEOs in PNG are more optimistic about the year ahead than they were at this time in 2016.
The three main issues for CEOs in 2016 were concerns over foreign currency availability; the pressing need for improvements in infrastructure, utilities and communication; and a faster fiscal response to the budget deficit. According to the results from our 2017 half-year “Business Barometer Survey”, these challenges remain.
It would seem some of the optimism may be attributed to time, in that businesses have now had more than 12 months to develop appropriate responses to some of these challenges, and are now in a better place to think about the opportunities. The other reason for the optimism is the fact that more respondents to our survey indicated that revenue and profits in their businesses had either stayed the same or increased over 2016. In addition, when asked about the ensuing six months, a significant proportion of our survey respondents were confident that revenue and profits would either stay the same or improve. This is positive considering the situation in 2016. It is not all positive, though; there are still many businesses that have shrunk in size and revenue terms, with some of them not expecting any improvement in the near term. As 2017’s challenges are substantially the same, the optimism is probably more to do with resilience of PNG businesses.
What are businesses in PNG doing to mitigate financial losses during challenging times?
SEETO: We are seeing varied outcomes for businesses, but there is some commonality on how they are responding in the current market environment. While defensive strategies such as reducing employee headcount and cost cutting are happening, interestingly, the majority of businesses seem to have a growth mindset. They are pursuing inorganic growth opportunities, looking at ways to improve productivity, introducing new products and services, and accelerating investments. We don’t have any concrete data on the success of these initiatives; however, good business starts with having the right intent and frame of mind.
How does PNG’s situation compare to other emerging markets in the Asia-Pacific region?
SEETO: The response from PNG CEOs resembles the sentiments shared in PwC’s recent “New Ways to Win in Emerging Markets” report. The report suggests that if businesses can look through the challenges, which in emerging markets are many, there are greater opportunities to be had. The report does focus on larger markets, but there are clearly parallels to PNG. It is true that PNG does not have the market size of these economies, but these challenges could represent opportunities for those willing to invest. The report suggests there are thousands of opportunities for all sorts of forward-looking companies – big and small, established and entrepreneurial, domestic and foreign – in emerging markets, despite the challenges that exist. There are examples where companies have been successful in growth markets, but the report recommends that every company should have a plan to cultivate operational efficiency, innovation and other factors that must be adapted for each market.
The message is that every market has its issues, but as we’ve seen in countries with challenges similar to those in PNG, these should not be an obstacle to profitable growth. In the broad sense, we must remember that until there is greater diversification of PNG’s economy, we will continue to witness peaks and troughs that typically occur in a resource-based economy. As a result, businesses need to understand and manage this cycle.
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