Manufacturing in PNG centres on fisheries

In recent years, Lae, the capital of Morobe Province, has become PNG’s main manufacturing centre, with one of the most vibrant segments arising in the fisheries sector, especially tuna processing and canning. The country’s economic growth – expected to accelerate quickly now that the Exxon-Mobil liquefied natural gas project has come on-stream – is likely to benefit PNG’s industry tremendously, as the local market expands to supplement existing export trade. Planned industrial and commercial parks, if successful, will also bring new benefits for manufacturers and food processors.

Morobe’s industries face many obstacles, however. Infrastructure and land access are major concerns. In fishing and related businesses, global worries about depletion of fish stocks threaten new restrictions. The coming years will therefore be crucial for Lae’s manufacturers as they confront these issues while positioning themselves to take full advantage of GDP growth.

National Centre

Since Lae sits at the end of the Highlands Highway, the main transit artery between PNG’s most populous provinces, the city has long been a centre for all sorts of economic activity. Its port is now the country’s busiest, with a strategic location whose international connections rival those of the national capital, Port Moresby. Businesses involved in processing goods from the interior have thus long made Lae their home. Manufacturing employs around 25% of PNG’s formal workforce, according to the Lae Chamber of Commerce Incorporated (LCCI), with the sector responsible for some 6-12% of national GDP.

Among the major local manufacturers with factories in the city are PNG’s oldest food manufacturer, Paradise Foods, and KK Kingston, founded in Lae in 1972. The Lae Biscuit Company, Prima Smallgoods, Laga Industries, Mainland Holdings, Trukai Industries and Amalpack also have operations there. Lae’s international links are also evident from the presence of several multinationals in the city, including Colgate, Coca-Cola, Nestlé, Dulux Group, Japan’s PNG Taiheiyo Cement and Heineken, which operates through the SP Brewery.


Lae benefits from the country’s large fishing operations. Some 12-17% of the world’s tuna (mainly skipjack and yellowfin) is caught within PNG’s 2.4m-sqkm exclusive economic zone. Data on annual exports vary widely: the LCCI reports around 580,000 tonnes; the National Fisheries Authority (NFA) says it is 150, 000-200,000 tonnes a year; and the European Fisheries Commission claimed a total of 700,000 tonnes for 2012. Whatever the true figure, it is clear that the fish is one of PNG’s leading revenue-earners: the Pacific Tuna Forum (PTF) estimates that the yearly catch is worth some $1.3bn. Major overseas markets include Japan, the US, and the EU, and access agreements are in place with China, the Philippines, Taiwan and South Korea.

Trade Deal

Adding to these benefits is PNG’s Economic Partnership Agreement (EPA) with the EU, which also covers neighbouring Fiji. Inked in 2009 and ratified in 2011, the EPA allows duty-free, quota-free access to the European market for PNG-made goods, which would otherwise be subject to the EU’s “rules of origin”. This means vessels can fish outside PNG’s waters and still take advantage of the EPA, provided that their catch is processed in PNG. The result has been a major surge in the number of tuna processing factories in Lae and in the export of canned fish. Germany, the UK and the Netherlands are now major export markets for PNG’s canned products, while Spain and Italy are growing markets for tuna loin.


A further advantage is state incentives for investment in the fishing sector. These include 100% “accelerated depreciation” tax deductions on outlays for new plants and materials; a three-year corporate income tax holiday on profits from the sale of canned, loined and smoked fish; and a potential double deduction for export market development costs.

Onshore Units

Vessels belonging to these onshore investments now bring ashore about half of PNG’s catch, according to the NFA, while the rest is caught by foreign purse seine vessels – boats that use large, round, vertical dragnets. In the past, the latter group had had the largest haul, with much of the tuna catch going abroad for processing elsewhere.

Anxious to stem this outflow, the city, provincial and national authorities have all encouraged the rise of local value-added processing. Indeed, this was one rationale behind the EPA, as the EU supports the growth of local value-added operations as part of its economic aid strategy. The PTF estimates that, if more value-added methods were employed, the tuna industry in PNG could be worth some $2.7bn a year.

Joint Ventures

Many onshore operations are joint ventures with foreign companies, whose bases in PNG enable them to benefit from the EPA. One example is Majestic Seafood, a joint venture between Frabelle Fishing Corporation, Century Canning Corporation (both from the Philippines) and Thai Union, a subsidiary of Thailand’s Union Frozen Products, the world’s largest tuna cannery. Majestic opened a new, $38m cannery at the Malahang Industrial Park in Lae in 2013. The joint venture exports the products, while Frabelle (which has a cannery of its own in Lae) sells to the local market. Frabelle has invested much in Lae since it began operations, refurbishing six of its boats and spending $4.5m on phase one of a new wharf, with the same sum earmarked for phase two. By 2018, this will give the company 500 metres of wharfage, along with a 300-tonne storage unit for sunflower, olive and soyabean oils – products used in the canning process.

There are other such ventures in Lae. Malaysia’s International Food Corporation has a plant that began processing imported mackerel, and later tuna as well. China’s Zhoushan Zhenyang Deep-Sea Fishing Company has invested $20m in a canning plant. A joint venture by Nambawan Seafoods, a Filipino-Taiwanese joint venture, has a tuna cannery due to open in late 2015. PNG’s largest canner, RD Tuna (owned and run by the Philippines’ RD Group), though based in Madang Province, uses Lae as an export point for processed goods.


Though Lae offers considerable advantages to manufacturers, infrastructure often falls short. Rapid expansion of trade has led to congestion at Lae Port, delaying boats in cargo offload and pushing up costs. Power supply has been patchy, with blackouts frequent enough that many firms buy their own generators. The state electricity provider, PNG Power, announced in February 2015 it was installing a 25-MW standby generator for the city. Frabelle has even bought a biomass plant fuelled by coconut shells.

Another recent challenge has been securing property for new processing plants. As the port city has expanded, traditional urban areas have filled up, pushing demand for real estate into areas subject to customary ownership laws, whereby land is owned not by individuals but by a clan or tribe. The search for an agreeable formula for putting this land to industrial use continues. Currently, much of it is leased to companies on a long-term basis, rather than purchased.

Finally, the tuna industry faces the challenge of sustainability. It must ensure that illegal, unreported and unregulated (IUU) fishing is curtailed, if PNG is to keep its EPA in this area. In 2014, the EU warned the country to take stronger measures against IUU fishing, granting a six-month extension in February 2015 to come up with further plans. The solution may well involve future restrictions on the “vessel day scheme” under which licences for fishing days are auctioned to national bidders. For now, though, the fish processing sector, like manufacturing overall, continues to expand. With a dedicated fishing wharf likely on the way at Lae Port, as well as a satellite industrial city near the expanded airport at Nadzab, busy times lie ahead for Morobe.