Interview: Chey Scovell, CEO, Manufacturers Council of Papua New Guinea
How would you assess government attempts to provide greater incentives for domestic industry?
CHEY SCOVELL: There are two aspects that you need to take into account to answer this question. First, you need look at the strategic plans that are being written. From a private sector perspective, those are very sound and instil great confidence. Second is the scorecard on implementation of said plans. This is a bit of a mixed bag because many plans have not been implemented.
Under the current government things have started to move in the right direction. One recent example is fishing subsidy reform. Previously, if you set up a fish processing facility in PNG, you were eligible for subsidised access to fishing areas. However, the scheme backfired, and most companies took their fish offshore while still receiving subsidised access. The 2018 budget changed this. Now you get a subsidy based on the volume you actually process in PNG. The new tariff system has been an effective way to put PNG’s interests first. In PNG a lot of business activity is unaccounted for. Huge profits are made by predatory pricing, and we don’t see it being reinvested in the economy. There is no disputing that other macroeconomic tools may work better than tariffs, but they often come down to direct or indirect subsidising. PNG does not have that kind of money. With tariff relief, we are already seeing reinvestment in PNG, even by those who previously repatriated lots and contributed little to PNG.
To what extent is PNG attractive as a consumer market to industrial investors?
SCOVELL: From a commercial point of view, PNG is very attractive. We have a population of over 8m, and about one-third of them are under the age of 25. Only 300,000-400,000 are formally employed, but that doesn’t indicate actual employment levels. There are also a lot of people working in the formal sector who are not in the system. This means that between 3m and 5m citizens have some form of regular disposable income to spend. From a purely operational point of view, however, PNG remains challenging, from high costs of doing business to weak investment protection. This is reflected by the “Made in PNG” logo used to promote local products. According to independent market research, 94% of people surveyed think believe a product was made in PNG when they see the logo. Over 88% of people think it is of equal or higher quality than foreign-manufactured goods. Also, over 80% think that it is of benefit to the local market as it is made by locals. Despite this, less than 5% make the conscious decision to buy locally made products. The majority of customers are still motivated by lower prices, which gives an advantage to counterfeit and smuggled goods, of which there are plenty, with some even using the “PNG MADE” logo to deceive buyers. PNG is attractive commercially, but from a manufacturer’s point of view, there is still a lot that needs to be improved upon.
How can infrastructure improvements boost industrial productivity and competitiveness?
SCOVELL: We need to have supporting infrastructure, from transport to ICT and services. Again, our government has excellent plans on this, but we continue to see too many adhoc projects being funded while the budget makes insufficient funding to implement the plans, though there has been tangible progress on road related infrastructure. The refurbishment of the Highland Highways, for example, will be pivotal in boosting agro-industry. Urgent reforms to bring more accountability, transparency and productivity are needed. For instance, we need packaging facilities in the Highlands region so that small-scale farmers can bring their products to market; industry needs to have access to better water and power services; and the lack of infrastructure is a major constraint for manufacturers. Airstrips also need to be improved, because without proper airport facilities, low-cost carriers are unable to start flights to PNG’s tourism destinations.
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