Why is Lae a good place to invest relative to other centres in Papua New Guinea? Current indicators show that business is doing relatively well throughout Papua New Guinea but more particularly in Lae and much of this is due to the following reasons:

1. Good Coffee prices

Historically Lae based industry was linked to Highlands’ trade due to the geographical connection of Lae to the five Highlands Provinces. A large proportion of products either fully imported or locally manufactured by Lae industries are transported along the Highlands Highway. In return Highlands produced coffee is brought back to Lae for export.

The slump in world coffee prices in 1994, which continued for the next ten years, effected the coffee trade in PNG, and quantities available for export slumped because it was sometimes not viable to bring the crop to the market - especially from remoter areas. The slump in PNG coffee changed the way business was conducted in Lae forever. Industry had to adjust and look to be involved in wider business activities and gradually products were produced for a broader market, not only for the coffee related trade.

Lae industries are becoming more diversified and resilient, with a large percentage of the products manufactured or repackaged here in Lae. These products are now aimed more at the general domestic market, with Port Moresby being a major target and with some products even being sold on the International Market.  Hence Lae has to a certain extent broken the annual cycle of reliance on the coffee trade.

The world coffee prices climbed rapidly in 2004 and continue to remain at good levels. The resultant increase of cash into the economy has been a real boost to Lae businesses, with most businesses benefiting especially the transport industry, which had stagnated for 10 years. 

This has left Lae businesses in an excellent position – having strengthened and diversified their range of products to supply the PNG market, they now have the added effect of a good coffee trade opening up the traditional markets again.>

2. Mining Activity

The PNG Government introduced improved incentives to mining and petroleum industries in 2002, which has led to an increase in exploration and development activity in this sector throughout the country. Lae is ideally located to benefit from this mining boom, as many of the developments rely on Lae for importing and exporting, servicing and delivering their supplies.  This is particularly relevant to the nearby mining developments at Hidden Valley, Kainantu, Wafi and Ramu Nickel. 

3. Government's better management of the budget

The better management of the PNG budget for the past five years has resulted in improved confidence in the private sector. Businesses have been allowed to get on and conduct business without government inspired disruptions. The resulting steady Kina and improved overseas currency reserves, has had a positive effect on the way business conducts itself in general throughout PNG.

4. Removal of some impediments to business

The Government has involved itself in a process to remove impediments to conducting business.  Whilst there has been some success, there is still a long way to go. In general however the Private Sector is happy with the fact that the Government has continued to show an interest in this process.

5. Improvement of Lae Port

The Lae Port is the largest in the country handling more than 60% of the nation’s total imports and exports. The port is now busier than ever as it is more economical for overseas ships to sail direct to Lae, rather than drop cargo off at smaller Provincial wharves. Lae Port has now become the shipping hub of PNG, and its facilities are under enormous pressure with more cargo and more shipping movements.

Recognizing that the Lae Port has to be expanded, PNG Ports Corporation Limited is negotiating a loan from the Asian Development Bank that has set aside about US$110 million to develop the “Lae Tidal Basin” – a swampy piece of land beside the current port, which will add 240 metres to the wharf area. The completion of this project in 5 years will see Lae with a modern port facility capable of handling the increased shipping needs and the port related services.
       
All the above indicates that business in PNG and particularly Lae is very healthy indeed. 

Is there a downside?

The City and Provincial authorities have not been able to maintain the current city or provincial infrastructure in an appropriate manner. The result is that city roads are in a dreadful state, there are little or no street lights and the sea has caused considerable unchecked erosion. The run down state of these services adds unnecessary costs to the operation of business in the city.

A rise in criminal activities has been associated with Lae for some time and we certainly cannot say that Lae is crime free. Unfortunately the run down services add to the crime problem. It is an unfortunate reality that crime is an extra cost of doing business in Papua New Guinea.

The Lae Chamber of Commerce is working closely with the Provincial and City authorities concerning the infrastructure deficiencies issues. We facilitate monthly Law and Order meetings between respective authorities in an effort to decrease the crime problems.  We are ever hopeful that permanent solutions will be found to these perennial problems.

'Business Advantage (Magazine) visited PNG's second largest city, Lae, and discovered a vibrant centre with a wide range of commercial activities.'

'Although it plays second fiddle to the national capital Port Moresby, Lae is undoubtedly PNG's industrial capital and communication centre, with considerable activity in the areas of manufacturing, trading, agri-business and, more recently, fisheries.'

"Lae really took off around 1969 when the Highlands Highway was constructed." says Alan McLay, the aptly named President of the Lae Chamber of Commerce. "With its central location, access to the Highlands, and port facilities, it was a natural industrial centre. Nowadays, 60% to 70% of all PNG's trade passes through Lae, including 90% of coffee exports."

Untapped Opportunities

'In many ways Lae is more attractive that the capital, with its appealing coastal setting, large Botanical Gardens and proximity to rainforest wildlife. In spite of this, Lae tends to have less appeal to expats than Port Moresby, due to the fact that the health facilities, schools, and executive housing do not match those in the capital.'

'When it comes to restaurants and night life for instance, Lae has been left behind by Port Moresby in the past decade. Lae also shares the same security probelms as Port Moresby, with its accessibility making it an obvious destination for itinerants from the Highlands.'

'One local business leader pointed out that this situation may in fact be something of a vicious circle. Few expats may mean less investment in an area such as services for instance. Whether or not this is the case, Lae certainly strikes one as 'under-serviced' in many spheres, even by South Pacific standards. This would suggest that there are many untapped opportunities especially given its healthy economy.'

New Investment

'Things certainly are looking up economically. Frabelle's new Tuna Cannery and R.H. Group's major new printing works have recently been inaugurated. International Food Comapny (IFC) has plans for new investment in the area, the Melanesian Hotel is to undergo a major upgrade, and diversified agri-business enterprise Ramu Sugar is growing fast.'

'Perhaps the biggest driver of local growth, however, will be Harmony Gold's major new mining project at Hidden Valley, three hours drive from Lae. Sigificant benefits are expected to flow from this large scale project.'

Chamber of Commerce

'A key facilitator in this economic surge is Lae's very active Chamber of Commerce, whole role takes on particular significance given that this major commercial centre is so removed from the seat of government. For someone interested in doing business in lae, it provides an excellent point of reference.'

(Extract from 'Business Advantage: Papua New Guinea 2007' - by R. Hamilton-Jones, © Copyright 2007. Business Advantage International website: www.cmmc.com.au)

In Morobe the level of employment increased by 4.7 percent in the December quarter of 2006, compared to 1.3 percent in the September quarter of 2006. Higher employment was recorded in the building and construction and agriculture/ forestry/ fisheries sectors. The growth in the building and construction sector was associated with a fencing project at the Nadzab airport and road maintenance in Lae. In the agriculture/ forestry/ fisheries sector, the increase is due to the commencement of a new tuna loining operation asociated with the establishment of a new tuna cannery in Lae. Over the year to December 2006, the level of employment grew by 9.4 percent.

By urban areas, all surveyed centres, except Goroka and Madang, recorded increases in the December quarter of 2006. In Lae, prices increased by 4.4 percent in the December quarter of 2006, compared to and increase of 4.0 percent in the September quarter. In Port Moresby, prices increased by 3.1 percent in the December quarter of 2006 following and increase of 2.9 percent in the September quarter.

In Lae, higher prices of fruit and vegetables, motor vehicles, cigarettes and marginal increases in other food items and in the 'rents, council charges, fuel, and power' expenditure group contributed to the increase.

Inflation movements in Lae contributed 1.0 percentage points to the overall movement in the CPI. (By comparison) in Port Moresby, higher prices in the 'transport and communication' and 'household equipment and operations' expenditure groups led to the increase of inflation and contributed to the 1.3 percentage points to the overall movement of the CPI. The increase in Rabaul was attributed to higher prices for betelnut and fruit and vegetables and contributed to 0.1 percentage to the overall movement of the CPI. In Goroka, lower prices for betelnut, fruit and vegetables and in the 'rents, council charges, fuel and power' expenditure group contributed to the decline. Goroka and Madang contributed negative 1.7 and negative 0.3 percentage points respectively to the overall movement in the CPI.

The weighted average kina price of Papua New Gunea's exports increased by 38.0 percent in 2006, relative to 2005. There was an increase of 45.8 percent in the weighted average kina of mineral exports, with higher prices of gold, copper, and crude oil exports. For agricultural, logs and marine product exports, the weighted average kina increased by 3.4 percent. This was attributed to higher prices of cocoa, palm oil, tea, rubber, logs and marine product exports, which more than offset the declines in the prices of coffee, copra and copra oil.

Bank of PNG - Quarterly Economic Bulletin - December 2006

Lae may be the birthplace of human settlement in Papua New Guinea. Axe heads found at Bobongora have been dated at 40,000 years, and it is believed early coastal settlements were flooded by rising sea levels after the last Ice Age, destroying most of Papua New Guinea's prehistoric artifacts. 

When German colonists first arrived in the 1880's, many parts of Morobe were curiously uninhabited, including the fertile Wau and Bulolo valleys. The two dominant groups of people were the Leiwomba who occupied the Lae area, and the ferocious Anga warriors of the central mountains.  Morobe Province offers a wide variety of interests for visitors, including a five day white water rafting trip down the Watut River. The Watut tumbles from the 3000 metre Kuper Range to sea level at the rate of 20 metres a kilometre, rushing through 150 rapids.  'Maus Buang' and Labu Tali villages are the nesting places for leatherback turtles in late November until early February. The turtles dig deep nests in the sandy beaches and lay up to 100 eggs each, which hatch about two months later. These reptiles weigh up to 500kg and measure two metres in length. 

To the east of Lae are the towns of Finschhafen and Sialum, sites of the first German occupation of the area. Offshore are a number of magnificent islands merely 12 kilometres from the coast. The Tami Islanders are renowned for their beautifully carved wooden bowls. Other islands include Umboi Island, which is the largest in the Siassi Group.

All these islands are in the volcanic belt which extends through New Britain and down to the north coast of New Guinea.  Other attractions in Morobe include the Research Institution, the Wau Ecology Institute, which is a privately funded centre dedicated to soil regeneration and the investigation of seed dispersal by birds. The institute also has a museum and zoo, open to the public.  There are numerous walking tracks in Morobe, especially in the Wau area. Old gold mining routes reveal interesting relics and wartime fighter planes can still be seen in the jungle. Experienced guides are sometimes necessary on the more
difficult walks. 

The McAdam National Park is a 20 square kilometre flora and fauna sanctuary founded in 1962 to preserve the last virgin stands of Hoop and Klinkii pine and over 200 species of birds native to the area. Menyamya and Aseki are in the heart of Anga country, which is now a coffee plantation centre. Traditional dress can still be seen, and mummified bodies are one of the more macabre attractions of the Anga's primitive past.

In 1937 pioneer American aviator Amelia Earhart took off from Lae on one of the final legs of her round theworld flight . Her next stop was a tiny speck of land called Howland Island, 4,000 kilometres out in the Pacific Ocean. She never made it. Lae was the last place to farewell the famous adventurer. During WWII, Lae was occupied by the Japanese and became one of their strategic bases against the Allies. 

Modern day Lae is an attractive tropical city, well serviced by department stores, banks, travel agencies, and an infrastructure of small traders and specialty craft and artifact outlets. Known as a garden city, Lae's beautiful Botanic Gardens has boosted its reputation as a place of natural splendour.  Lae is also the site of the Papua New Guinea University of Technology, which houses the Matheson Library the largest technological library in the South Pacific. "Unitech", as the university is known, has a large public exhibition of rare and valuable artifacts. 

Lae has three markets which sell food and local curios. Eight kilometres from town Malahang Beach is the last resting place for the remains of the Japanese landing barge, Myoko Maru. On the way to Malahang the road passes Ampo Lutheran Mission which was used as a field hospital during the war, and is one of the few buildings in Lae to have survived the fighting.