With a seemingly endless supply of fertile land, the agriculture sector in Papua New Guinea has enormous potential to strengthen the economy and deepen the pockets of local farmers. While a number of challenges stand in the way of these opportunities, PNG’s organic and fair trade credentials are gradually opening high-value niche markets and bolstering export figures. As such, the advancement of crop production is a major priority for the government. As the largest employment sector and the third-largest export revenue generator, agriculture is recognised as the country’s best means of diversifying its basket of goods and easing reliance on extractive industries. In order to achieve this, policymakers have been collaborating with international organisations in an effort to bridge gaps in supply chains and alleviate the strain growers have felt from inadequate infrastructure and high operating costs, which in turn creates a more viable platform for commercial ventures.
Domestic Consumption
While mineral exports have generated vast sums of capital for PNG in recent history, agriculture remains the most important sector for Papuans. With 80% of the population surviving on subsistence farming, the sector underpins the cash economy and supports the majority of villagers, who produce food for consumption and the raising of animals, and sell extra produce to domestic and international markets to generate income. The country is rich in natural resources, especially in agriculture, but the model now is mainly based around subsistence farming. There are no advanced farming practices, and therefore output is not as optimal as it could be.
Despite the nation’s fertile lands, the country continues to import a wide variety of foods, which stems in part from minimal public funding causing structural shortages in the form of poor transport networks and land ownership issues, in turn resulting in a lack of private investment. However, the adoption of modernised techniques and an increase in foreign involvement is assisting with market dynamics and product offerings. Prior to the arrival of major investments in the extractive industries and the completion of the PNG LNG project in 2014, the combined efforts of agriculture, forestry and fishery businesses accounted for more than 20% of the country’s total gross value added, making it the largest contributor to the economy.
The agriculture sector continues to employ the vast majority of the workforce, and whilst its performance in recent years has dwindled on the back of a weak commodities market, poor weather conditions and untimely crop diseases, it still accounts for 25-27% of GDP. The exact input to GDP is difficult to calculate precisely because of a lack of data surrounding the subsistence sector and its overall contribution to the agriculture industry. Rough estimates put its contribution between PGK2bn ($634m) and PGK5bn ($1.6bn) annually.
Increasing Production
In an effort to drive structural development in agro-industries, the government of PNG is actively pursuing farming optimisation programmes with the assistance of international organisations such as the World Bank’s Productive Partnerships in Agriculture Programme (PPAP), which is geared towards developing value chains to improve the livelihoods of smallholder cocoa and coffee producers. Although there have been a number of notable advancements made recently – particularly in terms of strengthening value chains and improving the efficiency of standard production and distribution methods – there are still significant challenges facing the sector. A variety of initiatives are complementing efforts undertaken by the PPAP, which include efforts by the National Agricultural Research Institute (NARI), a publicly funded research organisation that has developed a number of technologies to drive forward agricultural production. Additionally, the NARI has taken proactive steps to promote the investment potential of food crops, with a particular focus on sweet potato and bulb onion crops, among others. Increased investment will improve value chains, foster the development of domestic consumption markets and expand export opportunities.
Market Dynamics
Despite benefitting from tropical rains following the drought of 2015, structural gaps across value chains continue to hinder production targets. While major efforts are currently under way to narrow existing market gaps, at present the missing links still cause higher production costs, which has historically restricted investment, in turn affecting progress in the harvesting capabilities of farmers. Under its current structure, PNG’s agriculture market consists of approximately 80% smallholder farmers, who for the most part have difficulty accessing inputs and only have limited training in modern farming practices and trade on a commercial level. According to Greg Worthington-Eyre, CEO of Trukai Industries, progress is attainable. “The lack of a structured market system is hindering growth in sustainable agriculture. We need to get to a point where quality and price are consistent,” Worthington-Eyre told OBG.
As it stands, palm oil is the only major crop that employs a plantation-style model. Although there was previously a mix of crop ventures across the country, the landscape is now largely comprised of small growers who are unable to capture market demands as a result of a lack of effective economies of scale. A lack of resources and training among smallholder farmers is compounded further by a fragmented post-harvest system that has insufficient handling and storage facilities. As a result, a good portion of fruit and vegetable harvests are spoilt by the time they reach the market. In most cases the task of getting products to the market is cumbersome due to a weak transportation network. Moreover, drastic changes in temperature can create problems, for example it is difficult to transport cash crops from cool highland areas to coastal ports where the temperature is significantly higher. In lieu of value chain shortfalls, PNG’s agriculture sector presents a variety of investment opportunities, according to Gallit Tamair, business development manager of Innovative Agro Industry. Tamair told OBG, “With so many different climates and terrains almost anything can be produced here, but first you need to overcome land issues and structural gaps.”
In order to encourage a greater number of investors, policymakers need to address various structural bottlenecks, Ian Orrell, head of sustainability for New Britain Palm Oil Limited (NBPOL), told OBG. “The government’s role is to encourage investment in the business of agriculture, which is a long-term commitment,” he added, “This does not include the creation of artificial monopolies. The government’s goal is to help facilitate an environment where agriculture can compete fairly in international markets, whilst avoiding overregulation which creates a disincentive for private investment.” As is stands, PNG’s agriculture export market is dominated by four main crops – oil palm, coffee, cocoa and copra – which account for a combined total of approximately 90% of all agro-exports. Other notable export contributors include tea, cardamom, rubber, chillies and pyrethrum. There is considerable potential to develop other crops and expand export markets, however, the big four dominate commercial activity and this trend is likely to continue.
Oil Palm
The oil palm industry, which operates under a nucleus-farming model, is the most developed and best-performing industry. Although the segment’s contribution has varied over time, in recent years it has accounted for more than half of all agriculture exports. Currently, there are two major oil palm companies in PNG, namely NBPOL and Hargy Oil Palms. NBPOL, which is 50 years old as of 2017, is the larger of the two, with plantations in West New Britain, Ramu Valley, Milne Bay, Poliamba and Higaturu, and has a total of 83,000 ha, including one plantation in the Solomon Islands. The company’s oil palm seed operation in West New Britain is evidence of what can be achieved in PNG if investment is channelled effectively. It is home to the Dami Research Station, which delivers over 6m world-class seeds per year. Similarly, Hargy Oil Palms is testament to the success of the industry, the company has developed 13,500 ha planted in six different locations, from Bialla Town to the Ulamona volcano, with plans to expand to 20,000 ha by 2020.
While the oil palm industry is dominated by two companies, there is still a strong presence of small-scale growers. According to data from the Rural Industries Council, there are 21,085 smallholders involved in cultivating the crop, of which 14,887 are village growers. The momentum gained by the oil palm industry has not been straightforward, it is an ongoing process that requires an emphasis on long-term investment. Despite high operating costs, the oil palm industry remains a standout performer, though the future expansion of existing plantations is somewhat uncertain given land constraints and voluntary compliance standards. As it stands, 97% of land is customary and the remaining 3% is state-owned land. A large mass of customary land has been granted to investors via Special Agriculture and Business Leases (SABLs), which have been met with controversy and public disapproval. Furthermore, the majority of land in PNG is under tree cover, and according to international deforestation and sustainability agreements, there is to be no conversion of primary forest, meaning that the vast majority of land in PNG cannot be developed, aside from seriously degraded grasslands. Secondary forest can still have a high conservation value, however it tends to be high carbon stock.
Coffee
Before oil palm dominated export flows, coffee was the most important crop for PNG. During its peak years the production of coffee consisted of more than 150 commercial operations, although dynamics have since shifted, with production now dominated by smallholder growers who account for around 95% of the market. Unlike large-scale plantations, rural growers lack the training and equipment needed for industry leading practices. In addition, weak infrastructure and unstable commodity prices have led some growers to plant other crops.
In the near term, the presence the coffee berry borer (CBB), an insect pest that devastates crops, is set to reduce harvest numbers significantly. Despite these shortcomings, the industry still accounts for around 1% of international production, with the majority of exports bound for Europe. Major plans are in the works to rehabilitate the industry and capture growing international demand in niche markets.
Cocoa
At one stage PNG’s second most important crop in terms of export revenue, cocoa now occupies the third spot. It is grown in 14 states, with East New Britain, East Sepik, Madang and North Solomon producing about 75% of the total harvests.
The sector is currently on the rebound after battling the cocoa pod borer (CPB), which destroyed cocoa trees across the country and forced many smallholders to pursue other crops. However, some industry experts believe the experience gained from the CPB has aided the development of agriculture as a whole. Potaisa Hombunaka, project manager for the PPAP under the Coffee Industry Corporation (CIC), told OBG, “There is no need to press the panic button. Both the CBB and CPB are blessings in disguise. The CIC is now well prepared to handle future outbreaks, and the people have a new-found appreciation of the economic value of crops. Trees are now seen as an economic asset.”
In terms of damage, East New Britain was hit the hardest by the CPB, which traditionally has been among the strongest producers, accounting for 24% of total production from 2006 to 2015. Although East New Britain is still recovering, other areas, such as North Solomon, East Sepik and Madang, have ramped up investment in the crop, and the PPAP is assisting with redevelopment initiatives in both East New Britain and Bougainville, which should greatly contribute to the resurgence of the industry.
Copra
The coconut industry has a long history in PNG, accounting for 220,000 ha of land, or 1.86% of total commercially cultivated land. According to official data, PNG produced 187,000 tonnes of copra in 2015. Major market destinations for copra are the Philippines, Australia and Bangladesh, while the top-three destinations for coconut oil are the Netherlands, Germany and the UK, and the top copra meal export markets include Australia, New Zealand and South Africa. In 2010 the government set a production target of 440,000 tonnes of copra per annum by 2030, a 135% increase in 20 years, though whether this target can be achieved remains to be seen. If the government is to be successful, it will need to invest heavily in upskilling smallholders and increasing the adoption of new technologies and high-yield coconut varieties. At present, 14 provinces are involved in the coconut industry, with a total of 409,417 households or 1.5m people being involved in the cultivation of coconuts.
Rubber
Apart from the four major contributors, PNG has immense potential to increase export revenue from other crops. According to the “Planning for the Expansion of PNG Agriculture” paper by Sir Brown Bai, chairman of the Rural Industries Council, rubber export production ranges from 4000 to 5000 tonnes annually, accounting for around PGK32m ($10.1m). The majority of exported rubber is produced in the Central, West and East Sepik provinces. While there are other regions that produce rubber, they generally lack access to international markets. As it stands, current production capacity could be greatly increased, though like most agriculture segments the industry it has lacked investment and is far from reaching its full potential.
There are a number of crops grown across the country that show substantial expansion potential, including tea, sweet potato, Irish potato, as well as a host of other fruits and vegetables. In addition, the adoption of new technologies is enhancing crop production and easing the reliance on food imports.
Smooth Sailing
A major natural advantage of PNG is its substantial fish stock. PNG has capitalised on this with its valuable fisheries industries, which comprises a range of different business units. These include inland river fisheries, aquaculture, large-scale deepwater tuna fisheries and many other supporting enterprises. In addition, the creation of the Pacific Marine Industrial Zone project in Madang Province and an incoming flow of foreign investors is set to support further local development.
According to official data from the National Fisheries Authority (NFA), PNG’s fisheries zone is 2.4m sq km, including an extensive coastline and a number of islands, making it the largest national fishing zone in the South Pacific. Given these geographical advantages, the government has identified the fishing industry as a key growth market. PNG accounted for an impressive 14% of the global tuna catch in 2016, and efforts are under way to capture new markets in China, Russia, the Middle East and the US. According to information provided by the NFA, that the government is currently negotiating preferential terms with various markets, with a focus on US and Asian markets. While an exact figure is difficult to obtain given the scale of fisheries and the cyclical commodity price adjustments, the PNG Fisheries Industry Association estimates that more than PGK1bn ($317m) in export revenue was generated through the fishery industry in 2016 alone.
While there is undoubtedly potential for PNG to participate on a greater scale in the international fish market, there are a number of challenges that need to be addressed. The sheer size of the fishing zone makes monitoring and controlling fishing activity a large-scale operation, and even though the NFA has taken notable measures in recent times to improve certification and promote sustainability, the sector suffers from a lack of human capital in speciality areas, slowing down processes and weakening capacity. Despite these issues, the fisheries segment presents a major avenue of revenue for the nation with significant potential for growth.
Timber
With 80% of the country under tree canopy, half of which is classified as virgin forest, PNG’s collection of hardwood is vast. Prior to 1995, logging activity in PNG was controversial due to limited reporting, but since then the industry has gained international credibility by working with Société Générale de Surveillance (SGS), a Swiss-based log export monitoring company. According to SGS PNG, a total of 3.61m cu metres of timber was exported in 2016, indicating a 7% decline from 2015.
Although overall demand for logs from PNG remains high, with 87% of exports making their way to China, this decline may continue. The market for logging exports could slow significantly as China’s housing market slows and President Xi Xiping’s policies limit state-owned enterprise speculative investments overseas.
A report released in 2017 by SGS PNG stated that the export of logs came from 15 forest clearance areas under special agriculture business leases, accounting for a record return of PGK1.08bn ($342.4m). In terms of geographical production, East and West New Britain accounted for 21% each, followed by West Sepik with 16%, while Gulf, New Ireland and the Western Province each produced 9%.
Land Reform
Stemming from long-term challenges in accessing customary land for development, SABLs continue to create tension in PNG. More than 5.5m ha of land has been handed over to foreign firms under the scheme, some of which was obtained illegally and led to illegal logging. The SABL scheme was created to promote a more efficient use of fragmented land, and initially welcomed a number of authentic agriculture development plans as mandated in the framework.
However the initiative has also been exploited, creating an environment for slash-and-burn logging operations. In an attempt to rectify these shortcomings a Commission of Inquiry (COI) began an investigation in 2011 and its findings were presented to Parliament in 2013. Following the evaluation of the COI, the National Executive Council (NEC) ruled that all illegal SABLs be revoked. Following the NEC’s stance the National Court nullified a significant number of illegally obtained SABLs.
The remainder are set to be converted to another form of land tenure using incorporated land groups under a proposed plan by PNG’s National Research Institute, that aims to convert SABL leases to Voluntary Customary Land Registration (VCLR). Whilst the ability of VCLR to settle land disputes remains to be seen, a major component of their success will depend on how they are implemented. This observation is based on a number of key industry players suggesting that SABLs were fundamentally sufficient, but the improper administration of the leases encouraged a negative cycle of land grabbing.
Government Response
While the agriculture sector has been hit hard in recent times by weather shocks, a mixture of programmes is set to strengthen the industry’s resilience going forward. Following the El Niño drought, which lasted from April 2015 through to November 2015, a series of untimely weather conditions spread across the country. As a consequence of the drought, frosts and floods hit several parts of the country throughout 2016, putting a major strain on food security. Additionally, an increase in pest infestation and high levels of nitrogen in the soil contributed to the depletion of staple crops. In an effort to assist the recovery of the agriculture segment, a recovery plan was devised by the National Agriculture Sector’s Disaster Response Team (NASDRT). The master plan initially identified two main objectives to support farming communities and strengthen national capacity, in order to generate sufficient seeds and planting materials. The NASDRT assigned a taskforce comprising five members from the Department of Agriculture and Livestock, the National Agricultural Research Institute, the Fresh Produce Development Agency and Food, and the Food and Agriculture Organisation of the UN, appointed with preparing an official Agriculture Recovery Plan for the nation.
Recovery Plan
Considering that 75% of all food consumed in the country is homegrown, a key component of the Agriculture Recovery Plan is the introduction of drought resilience training activities and adaptive farming practices, which should greatly bolster the abilities of smallholder farmers. Furthermore, a number of international organisations identified the availability of open pollinated (OP) seeds and planting material as inefficient in PNG. As a result, the taskforce set about increasing the provision of recovery inputs, including OP seeds and planting materials, livestock and various tools needed for re-planting work.
The overall efforts of the taskforce have also been complemented by a variety of international organisations who stepped in to assist with the damage control, including Australia’s Department of Foreign Affairs and Trade, the US Agency for International Development and other donors. While future strategies will still need to be designed and implemented to ensure long-term food safety and security, the Agriculture Recovery Plan is greatly assisting the development of national institutions.
Outlook
The sector as a whole is ripe for reform. While the extractive industries have benefitted from investment-focused policies, the agriculture sector has been overshadowed by inconsistent guidance and a lack of incentives for potential investors. In the foreseeable future palm oil will continue to drive the agricultural export market, while the production of other crops, particularly cocoa and coffee, remain dependent on commodity prices, as well as the capabilities and commercial awareness of local farmers. With the adoption of the PNG E-agriculture Strategy and other efforts, including development programmes such as the PPAP, the sector is showing signs of sustainable growth, further strengthened by PNG’s rising fair trade and organic profile.
Likewise, there is significant potential to improve the fisheries segment. In order to achieve this, however, the government must create an environment that promotes better management through development programmes, which will in turn ease access to international markets and thus generate substantial revenue for the industry.
The future of the country’s valuable hardwood assets is to some degree uncertain. Whilst international demand for PNG’s valuable collection of wood remains high, its long-term success depends greatly on the resolution of pending land issues.
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