As is the case in many mineral-rich countries that are economically dependent on raw material exports, the development of Papua New Guinea’s domestic manufacturing base has lagged behind that of the dominant mineral and petroleum sectors. While there are some notable success stories of local producers, efficient production of high-quality local goods is not yet widespread throughout the industrial sector.
ENCOURAGING GROWTH: In an effort to boost manufacturing production, the government is hoping to jumpstart the sector through initiatives such as PNG Made. Launched by the Manufacturers Council of Papua New Guinea (MCPNG), the programme aims to boost local manufacturing capacity and quality while at the same time promoting local products to increase demand among the public. Firms wishing to brand their products with the distinctive black, yellow and red PNG Made insignia must not only prove at least 50% of their product’s cost of production is incurred in PNG but must also undergo a quality-control test. To date, a diverse range of manufactured goods have earned the certification, ranging from food and beverages to furniture and industrial products. The field of parent companies is equally varied and includes both successful grassroots companies that have grown from the ground up to large international giants such as Coca Cola and Nestle, which operate local production facilities.
EXPORT POTENTIAL: While much of the potential growth of domestically produced products can be found in import replacement goods such as food and beverages, there is also strong potential in export markets. Expanding these segments will rely on utilising the country’s core competencies, particularly in the downstream agricultural subsector. International demand for locally grown palm oil, wood products, produce, seafood and other bioproducts remains strong, a trend that looks likely to continue for the foreseeable future. By exporting less raw product abroad, local outfits from spice refiners to coffee roasters will have opportunities to capitalise on the abundant labour pool and locally sourced inputs to start up and expand a host of businesses. As these operations develop, rising economies of scale will also have a knock-on effect on the domestic market, allowing producers to offer less expensive goods to the local populace as costs of production fall.
In addition to the generally available manufacturing tax incentives offered by the government, locally registered companies also hold a significant advantage over non-resident companies in income tax brackets, with the former generally paying taxes at a 30% rate and the latter at 48%. These factors, combined with the elevated price of imports inflated by high port fees, transportation costs and other non-tariff barriers, should provide ample incentives for PNG-based companies to roll out a steady stream of new and replacement products for the domestic market.
LOCAL CONSUMPTION: Although capitalising on government manufacturing incentives and regional economic growth play a significant role in boosting domestic capacity, of equal or perhaps even greater importance is the role of local consumption. The country’s young, rapidly growing population not four decades removed from declaring independence presents many opportunities for PNG Made. By capitalising on local pride and patriotism, domestic firms stand to benefit substantially from PNG’s burgeoning economy in the coming years as new investments and revenue streams pour into PNG and boost national spending power.
Recognising this, the MCPNG has also been proactive on the demand side as well, launching a television advertising campaign in 2010 that was funded by a grant from the Department of Commerce and Industry as well as a number of MCPNG members, including SP Brewery, Coca-Cola Amatil, Colgate Palmolive, PNG Forestry Products, Pacific Foam, Colourpack, Moore Printing and RD Tuna. PNG Made promotions have also worked with local web-based media company Skerah to launch interactive PNG Made auctions on Facebook, which engages visitors and potential customers by allowing them to bid on products and win locally sourced prizes.
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