Business Advantage PNG attended this week’s 30th Australia – Papua New Guinea Business Forum in Cairns. Here are some of our take-home observations from the annual event, which next year will take place in Lae, Morobe Province.
1. PNG is in demand
That might go without saying, with Australian investment in PNG totalling around $15 billion (K39 billion), but in his opening address, PNG’s Prime Minister Peter O’Neill made the point that the interest from Australia had never been stronger. No less than three Australian Prime Ministers had visited PNG in the past 12 months. ‘There have been periods when we have been lucky to have one visit in three years—let alone three in one!’ he told amused delegates.
2. A new paradigm in aid
Despite years of development aid, PNG is failing to improve in some vital areas. Australian Foreign Minister Julie Bishop expressed concern that PNG would not meet any of its Millennium Development Goals by 2015, and that it had fallen to 156th in the United Nations’ Human Development Index (something also noted on Day Two by National Petroleum Company of PNG Chairman Frank Kramer). The O’Neill Government has been arguing for a realignment of Australia’s aid program to support its development goals and appears to have got what it wants. In future, Julie Bishop announced, there would be a move away for the ‘donor and recipient’ relationship between the two countries. Indeed, she said 50% of all Australian aid would in future be directed towards infrastructure projects, with a greater focus on encouraging business and trade. There would be benchmarks and accountability, however, she warned.
3. Visas: the ‘one continued irritant’
The inability of Papua New Guineans to travel easily to Australia is the ‘one continuing irritant’ in the Australia–PNG relationship,’ according to PNG Prime Minster Peter O’Neill. ‘It is a sad reality that a Papua New Guinean businessman or businesswoman wanting to visit Australia on business has more difficulty than ever in getting a visa … In a mature relationship this simply should not be the case,’ he said, bluntly. We’re working on a technical solution, responded Julie Bishop. How long the solution—which Bishop said would resemble that used to process New Zealand visitors to Australia—will take to implement was not made clear. In the meantime, PNG’s ban of visas on arrival for Australian citizens wanting to visit PNG is expected to remain in place, in spite of protestations from the outgoing President of the Australia–Papua New Guinea Business Council (APNGBC), Peter Taylor, who claimed the ban would affect around 20,000 Australian visitors to PNG annually.
4. Economic zone in the north?
Could northern Australia and PNG one day form part of a single trading zone? Both O’Neill and Taylor also spoke in support of such a zone, which would facillitate the movement of people and goods across the countries’ common border. The proposal, which O’Neill hopes might also facilitate PNG’s selling hydropower to Australia from its planned Purari River hydro project, will now go to the annual Australia–PNG Ministerial Forum for further discussion.
5. The time is now
As delegates mingled in Cairns, the Spirit of Hela lay off PNG’s southern coast, loading up with the country’s first ever liquefied natural gas exports, bound for Japan. There was no going back from this point, argued ANZ’s Managing Director for PNG Mark Baker, who suggested that the advent of LNG meant PNG’s economy, if well-managed, was set on a new and exciting course. There were potential pitfalls, of course. As a good banker ought, Baker reminded businesses to keep a disciplined eye on costs and productivity in the current downturn that has followed the end of PNG LNG construction. He cited Warren Buffet’s celebrated and vivid observation: ‘You only find out who is swimming naked when the tide goes out.’
6. Diversification of PNG’s economy critical
While he said the fundamentals of PNG’s economy remained sound, Loi Bakani, Governor of the country’s central bank, argued strongly for greater diversification in the economy. Food security was an achievable goal for PNG, he argued, with a technologically advanced agricultural sector exporting to the region. Peter O’Neill had previously signalled it was time to start promoting PNG’s agricultural and tourism sectors and ANZ’s Mark Baker mentioned manufacturing. These sectors, if stronger, would act as a buffer against shocks to the economy, he asserted.
7. Infrastructure is starting to get traction
Along with the news about the focus on infrastructure in Australia’s aid program, several presentations identified progress in this area. Chis Bais, Acting Managing Director of PNG Power, listed an impressive list of power projects currently under way, while the National Airport Corporation’s Joseph Tupiri ‘s plans for the development of the nation’s airports, especially Port Moresby’s international airport, met with approval from the floor. With the enabling legislation for the creation of Kumul Holdings, Kumul Mining and Kumul Petroleum (the new holding companies for state-owned enterprises, mineral resources and hydrocarbon resources respectively) due to be presented to the current sitting of PNG’s Parliament, further progress can be expected.
8. Sovereign Wealth Fund is still coming
Gadens Lawyers Chairman Ian Clarke gave a reassuring presentation on the framework for PNG’s as-yet-incomplete Sovereign Wealth Fund (SWF), which is being established ‘to use the revenues of today for tomorrow’. A revised SWF organic law is expected in this session of Parliament. The legislative framework for the fund was good, Clarke said, complying as it did with the Santiago Principles which set down best practice for such funds. However, the key issue, he noted, would the composition of the fund’s board. This will be appointed (according to the current legislation) by a committee consisting of the Prime Minister, the Leader of the Opposition, the Governor of the Bank of PNG, the President of the PNG Chamber of Commerce & Industry (representing the private sector) and the Auditor-General.