PNG’s agriculture programmes lead to growth

Papua New Guinea’s climate is characterised by fertile soil and abundant rainfall, enabling the country to grow a number of tropical crops such as palm oil, coffee and cocoa, which account for around 80% of all agricultural exports. Meanwhile, sweet potatoes, cassava, fruits and vegetables are all farmed to serve the local market. In total, agriculture contributes around a quarter of the country’s GDP and according to PwC, 85% of the population is involved in farming. While some value-added conversion is taking place, most commodities are exported in raw form, and the country’s agriculture sector faces the challenge of converting cash crops to commercial farms. When it comes to securing an export niche and reputation, despite the high quality of some of its crops, country of origin branding is lacking.

As an increasing number of consumers worldwide demand organic produce, PNG’s remoteness and non-industrialised farming methods could be leveraged as a competitive advantage. “We have good farmers and we produce some fantastic coffee and cocoa. The problem is that we are not well known for it. There is room to better promote our high-quality, low-volume agricultural products,” Frank Kramer, the chairman of the National Petroleum Company of PNG (NPCP), told OBG.


At present, all of PNG’s cocoa production is shipped overseas, and the sector provides a strong working example of some of the challenges and opportunities its agro-processing sector faces as a whole. In line with its broader aim of supporting value-added industry, the government, with the aid of the World Bank, is looking to foster a local manufacturing industry. Farmers are being assisted in raising production levels in order to take advantage of rising demand from easy to access Asian markets. Demand is being boosted by dwindling supply from West Africa’s cocoa-producing nations, in the wake of that region’s continued efforts to recover from the ongoing effects of the 2013 Ebola outbreak.

PNG’s growers are still feeling the impact of an earlier cocoa pod borer infestation that transpired between 2008 and 2013 and prompted many to abandon their fields. Moreover, a World Bank-led Productive Partners in Agriculture programme launched in 2014 is aiming to help rejuvenate production by injecting $30m in projects in six provinces with the intention of increasing plantation sizes and improving yields. Around 234,000 cocoa seedlings were distributed under the scheme by the end of the year, with priority being given to improving access to technology and services.

The government has also offered to co-fund a feasibility study assessing the viability of producing chocolate and non-chocolate finished products such as drinks, fertilisers and vinegar. During an EU trade delegation to the country in early 2015, the CEO of the Belgian Chocolate Group stated that his company was considering using PNG as a sourcing base. Should the World Bank programme result in growing yields and increased investment in downstream manufacturing, the country could see its output recover to pre-2008 levels, when average production volumes came in at 35,000 to 40,000 tonnes per annum and contributed $70m in national earnings.


As with cocoa, locally grown coffee is considered to be of high quality. Even so, further investments to improve crop output and marketing efforts to establish a national brand are needed to reinvigorate the sector. In the early 1970s, PNG produced 27% of global coffee supply, and coffee production accounted for around one-third of the national economy. Due to ageing coffee trees and reduced assistance from development agencies, the sector fell into neglect over time. The country’s share of global production today stands at a marginal 1%.

Therefore, for the sector to make a comeback, the country must find the right balance of injecting funding and support to assist the 500,000 small hold growers in improving their yields, while keeping some elements of the production chain traditional to capitalise on the global trend for fair-trade sourcing.

Palm Oil

PNG is one of the world’s foremost secondary producers of palm oil after Indonesia and Malaysia, which together account for over 80% of global production. “The country should be applauded for the way it is processing and exporting palm oil competitively,” Gavin Murray, the International Finance Corporation’s (IFC) country manager for Australia, New Zealand, Timor-Leste, PNG and the Pacific Islands, told OBG. According to the US Department of Agriculture, in 1971 the country was producing just 3000 tonnes of palm oil per year. By 2013 this figure had grown to 630,000 tonnes.

Although PNG currently accounts for just 1% of global exports, the sector’s growth potential is vast. At present, 150,000 ha of land is being exploited for palm oil crop production, with an estimated additional 5.1m ha of suitable land going unused.


Around 75% of PNG’s land mass is covered by rainforests, and as is the case with palm oil clear felling everywhere, a balance must be struck between conserving one of the world’s most pristine eco-systems while creating a profitable logging industry that stimulates jobs and earnings.

According to a 2014 report by UK think-tank Chatham House, 70% of all logging in PNG is illegal. Moreover, efforts are under way to reform the Special Agricultural and Business Leases system that, while intended to empower the indigenous communities, has been ripe with corruption and abuse. At present around 85% of the country’s annual harvest is exported in log form, leaving potential for downstream processing. Timber lends itself well to products, both artisanal, such as furniture making, and industrial, such as pulp and paper milling.


Given the opportunity to manufacture and package food products for an increasingly affluent population, food and beverage manufacturers are upgrading their plant capacities. Global food giant Nestlé, in early 2014, announced that it would inject PGK21.6m ($8.17m) – creating 75 new jobs – to expand its factory in Lae and meet demand for its products, including Maggi noodles and bouillon.

Also in Lae, the food manufacturer Goodman Fielder has completed a snack plant, while the local fastmoving consumer goods (FMCG) group Paradise Foods is constructing a bottling plant as part of its efforts to re-introduce the Pepsi-Cola brand to the local market. “Considering some of the constraints and challenges associated with industry in PNG, the country would be well suited to start at the bottom of the pyramid. The local market demands fairly basic food products, and PNG has a strong agricultural base,” the IFC’s Murray told OBG. “Over time, manufacturing can evolve to become more sophisticated by moving into packaging using local materials.”

Companies are also exploring ways to incorporate locally sourced crops into their finished products. SP Brewery, for instance, is trialling the use of cassava (tapioca) as a beer brewing starch. Cassava, which is widely grown throughout PNG, has the advantage of being resistant to drought. Cassava-based beers have been launched in markets throughout West Africa, garnering popularity due to the lower selling price associated with using a locally grown crop as the main input starch instead of imported barley.


While most FMCG investment is geared to the domestic market, the tuna canning industry is taking advantage of bilateral trade agreements that offer EU member states liberalised access to canned fish products. In 2013 Thai Union Frozen, one of the world’s largest seafood producers, partnered with PNG’s Majestic Seafood on a $38m factory in Lae.

Previously, a large proportion of fish caught in PNG had made its way for processing to Thailand, where labour is cheaper. Investment in a local facility signals PNG’s potential to develop into a regional processing hub, with the possibility that tuna caught in other waters could be sent to PNG for canning before being exported to the EU market.

In addition, after a five-year delay, the Pacific Marine Industrial Zone (PMIZ) is moving toward completion after the government signed a $95m deal with China-based contractor Shenyang International in March 2013. Having allocated $24.6m toward the project in 2013 and another $21.9m in 2014, the government is set to spend at least $21.1m per year from 2015 through 2018. The Niugini Tuna processing plant currently under construction will be one of the first canneries in the PMIZ. The $500m complex will include a processing plant, a 300-metre wharf, 400-metre dry dock, and a cold storage plant.

Other projects currently in the works include the Malahang Industrial Centre which will include four new canneries; a Majestic Seafood plant, a joint venture between Philippines-based Frabelle Fishing and Century Canning with Thailand’s Thai Union Frozen Product; and the Nambawan Seafoods Tuna Project, a joint venture between Trans Pacific Journey Fishing and TSP Mariner Industries of the Philippines.