Made in PNG 2014 by Business Advantage International

Made in

PNG 2014

Manufacturing Agribusiness Fisheries Forestry

Sh owcasing Papua New Guineaâ&#x20AC;&#x2122;s produce

and

producers

www.madeinpng.com

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Made in PNG Contents

Contents Foreword...................................................................................................................................................................................... 4

FEATURES anufacturers look to the future............................................................................................ 6 M While 2013 was a quiet year for most of Papua New Guinea’s manufacturers, . they remain positive about future prospects, as Made in PNG’s exclusive survey . of the sector reveals.

PNG manufacturers’ vote of confidence.............................................................................. 12 While Papua New Guinea’s economy has slowed in the past year, many of the country’s manufacturers continue to see growth as the longer-term trend, and are investing in . new plant, new products and new marketing approaches. Manufacturers seek level-playing field on cheap imports................................................ 17 Cheap imports into Papua New Guinea are posing an increasing threat to . local producers, with reports of foreign companies ‘dumping’ goods in PNG . or under-declaring the value of imports.

Taking PNG produce to the world........................................................................................ 19 Papua New Guinea’s non-mineral commodities and processed goods are exported . all over the world.

SECTOR PROFILES

RESOURCES

Agribusiness......................... 24

Producer profiles............................................................................. 37

Fisheries............................... 31

Papua New Guinea’s manufacturing and agricultural hubs.......... 40

Forestry................................. 34

Useful contacts................................................................................. 41 Manufacturers Council of Papua New Guinea members............... 42

This publication was made possible through the support of the following organisations:

Fo r e wo r d

Foreword Welcome to the third edition of Made in PNG, your guide to the goods and foods grown, processed and produced in Papua New Guinea—and the people who produce them. As with previous editions, the goal of this publication is to raise awareness of the industry sectors that employ more Papua New Guineans than any other: agribusiness, fisheries, manufacturing and forestry. These sectors have always been important in ensuring that PNG is more than just a mining and gas economy. With the mining sector currently in a contraction phase, these sectors are more critical than ever for Papua New Guinea.

products—a process that creates jobs and increases revenues for the country. PNG is now a major exporter of canned tuna to the European Union, while our cocoa finds its way into some of the world’s finest single-origin chocolate. Meanwhile, sustainably produced timber is being used to create kit homes and fine furniture. PNG’s outstanding economic growth over the past ten years has driven increased demand for locally manufactured goods of all kinds, from construction materials and paint, to an enormous range of processed foods and cleaning materials. The prospect of a petrochemical industry in PNG also raises exciting possibilities for the future.

PNG has enormous natural advantages when it comes primary produce such as palm oil, cocoa, coffee, tuna and timber products.

The Manufacturers Council of Papua New Guinea remains pivotal to achieving a favourable business environment in PNG. With your support, the MCPNG will continue to assist businesses in leveraging many more opportunities in the future.

While these continue to be major exports, PNG is increasingly finding ways to add value to its primary

Murray Woo, Chairman Manufacturers Council of Papua New Guinea

Made in PNG is published by Business Advantage International Pty Ltd, Level 23, HWT Tower,  40 City Road, Southgate 3006, Australia, tel + +61 3 9674 7129, fax +61 3 9674 0400 www.businessadvantageinternational.com This publication is available free online at www.madeinpng. com. Printed copies can be purchased for AUD$35.00 (incl GST and postage) from the above address or by emailing info@ businessadvantageinternational.com.

Business Advantage International would like to thank Chey Scovell and Murray Woo of the Manufacturers Council of PNG and Alan McLay (Lae Chamber of Commerce and Industry) for their kind assistance on this project.

Some of the articles in this publication are edited versions of those first published on the online PNG business magazine, www.businessadvantagepng.com.

Project Director: Robert Hamilton-Jones . (rhj@businessadvantageinternational.com) Publishing Director: Andrew Wilkins . (aw@businessadvantageinternational.com) Editorial: Kevin McQuillan, Sonja Heydeman, Renée Otmar Design: Alicia Freile Cover images: New Britain Palm Oil Limited, Trukai, R D Tuna Canners Ltd, Manufacturers Council of PNG

Published in partnership with the Manufacturers Council of Papua New Guinea

DISCLAIMER Made in PNG is a general guide to some potential business opportunities in Papua New Guinea’s productive sectors and is not designed as a comprehensive survey. The opinions expressed herein are not necessarily those of the publisher and the publisher does not endorse any of the businesses or products featured, nor does it accept any liability for any costs or losses related to dealings with entities mentioned in this publication. Readers are strongly advised to pursue their own due diligence and seek relevant advice before making any business or investment decisions.

Credit: Trukai

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Coca-Cola Amatil PNG

Lae Biscuit Company

PNG Taiheyo Cement

Workers in Lae packaging rice for the domestic market.

Manufacturers look to the future While 2013 was a quiet year for most of Papua New Guinea’s manufacturers, they remain positive about future prospects, as Made in PNG’s exclusive survey of the sector reveals.

here is no question that Papua New Guinea’s manufacturers— which account for about 9% of the country’s GDP—have been caught up in the general downturn in the country’s economy, with a combination of lower investment in the mining and petroleum sectors, lower commodity prices and a stronger currency slowing growth and reducing domestic demand. ‘Business and demand across our manufactured products and imported industrial equipment is significantly down on previous years,’ Michael Kingston, General Manager of Lae-based K K Kingston tells Made in PNG. Jaime Martinez, General Manager of Coca-Cola Amatil in PNG, also reports that overall demand is down, ‘in part due to the economy and in part due to competition.’

‘We’ve seen a flattening off of rice imports over the last four months,’ observed Gregory Worthington-Eyre, Chief Executive Officer of Trukai Industries, at the end of 2013, although he noted it’s ‘still 30% up on what it was five years ago.’

Confidence remains So, after five years of unprecedented growth, driven in part by the construction phase of the massive ExxonMobil-led PNG LNG project (now close to completion), PNG’s manufacturers are looking forward to more modest rates of return. However, as the impressive levels of investment featured on pages 12 to 16 of this publication indicate, there is certainly still

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significant confidence in the economy’s prospects. ‘We remain confident that there are growth opportunities in the market, but they will not be as significant as they were over the last five or six years,’ says Stan Joyce, General Manager of the country’s main brewer, S P Brewery, echoing the comments of many. He notes a slowing down in the demand for premium products—a sign that Papua New Guineans are tightening their belts in the short term and returning to staples. S P Brewery’s Stan Joyce That’s certainly the observation of Peter Tannahill, General Manager in PNG for flour milling company Goodman Fielder. ‘We’re probably holding up not too badly, to be honest,’ he admits. ‘We’re closer than many other food manufacturers to being a basic commodity—rice and flour would be seen as part of the staple diet of the Papua New Guinean population. So, we probably haven’t seen the real extraordinary spikes or peaks that some of the more discretionary products have had when there’s been a bit more disposable income around.’ ‘We are highly reliant on commodity prices,’ explains David Peate, Managing Director of snack food manufacturer Paradise Foods. ‘Our customers are rural people who get their money from cash crops and we only have access to their disposable income. So, when commodity prices are down, disposable income is affected and gets smaller and smaller. So, there’s less money to be spent on luxury goods like processed food.’

High costs With revenues lower, there has been renewed focus on the high costs associated with manufacturing. ‘Doing business in PNG is expensive,’ says Paradise Foods’ David Peate. ‘For example, we have expensive and unreliable utilities, which force companies to provide their own backup systems, and security costs are high. In addition to this, ingredients and input cost are high.’ The cost of moving goods around a country is also a major impost, with roads often in poor repair.

‘The Highlands is our second major market after Port Moresby and transport companies are having to increase prices in order to recover the increased costs to them for running trucks up and down the Highlands Highway,’ notes Coca-Cola Amatil’s Jaime Martinez. ‘The cost of logistics and the time it takes to move product around this country, and Lae, is far too high,’ agrees Trukai’s Gregory Worthington-Eyre. It’s not just goods that need to be moved around either; the poor road network is also used by workers trying to get to work each day—one reason many companies provide their own transport to and from work. Manufacturers also note the hidden cost of employing workers who lack the necessary skills. ‘Skill shortages, specifically a lack of qualified tradesmen, is a big issue for us,’ says K K Kingston’s Michael Kingston.

Falling kina With many inputs imported from overseas, the decline K K Kingston’s Michael Kingston in the value of the kina in the second half of 2013 has only increased many manufacturers’ costs. Indeed, Manufacturers Council of PNG Chief Executive Officer Chey Scovell has described the weaker kina as a ‘real kick in the guts’ for local manufacturers. On the other hand, manufacturers that rely on local produce for their inputs have actually seen their produce become more competitively priced in recent months. Manufacturers are also nervously watching the outcome of deliberations to decide a new minimum wage in PNG—deliberations that, at the time of writing, were still in process. Currently just K2.29 an hour, an increase in the minimum wage will directly affect bottom lines at a time when revenues are falling and costs are already high. ‘Reduce the cost of doing business and then we can afford a wage rise,’ says Manufacturers Council Chairman Murray Woo.

Falling tariffs One thing most manufacturers agree on is the need to maintain

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New banking services open up rural business Innovative technology is helping BSP to bring banking services to remote areas of Papua New Guinea, in the process helping to bring rural businesses into the formal economy. Until very recently, access to banking in Papua New Guinea was limited to those who could travel to a bank branch to deposit or withdraw their money. That could involve a long trip and an expensive bus fare.

For farmers, access to a bank account will help to open up new markets, since larger retailers in Port Moresby and other towns often require farmers to have a bank account so that payments can be made electronically.

Credit: BSP

According to the Bank of Papua New Guinea, an estimated 90% of the country’s population is ‘unbanked’—that is, they do not use the banking system and subsist entirely in the cash economy.

Farmer George Waire of Magautou village signs his new BSP card at Magaut.

Drive into rural areas The major banks are using state-of-the-art technology to bring in new customers in remote rural areas of PNG who have never used bank accounts before. Some are landowners seeking to save the royalties from the massive PNG LNG project. Although some areas do not have serviceable roads, people can access banking services thanks to mobile phone coverage. With a more than 100% growth in transactions since the start of the year, BSP’s branchless banking service is really booming, BSP Rural Head Peter Komon told Made in PNG. BSP’s Rural Banking program aims to grow to 200,000 customers in the rural market segment by the end of 2014, up from 120,000 customers currently. ‘We are targeting the 8% of the population, living mainly in rural areas. So far, most are unbanked and rely on the risky and costly cash-based informal economy to transact, save money and access credit,’ Komon said. In addition to mobile banking, BSP also has a dense network of thousands of ATMs, EFTPOS merchants and agents, significantly

current import tariffs. These have already fallen by around 80% since the 1980s as PNG has tried to meet and exceed its World Trade Organization and other trade treaty obligations. APEC’s stated aim of abolishing all tariffs by 2020 is a further dark cloud on the horizon. ‘If the market was open slather, I don’t know how many local businesses would survive,’ says Paradise Foods’ David Peate. ‘We don’t want tariffs to come down anymore,’ states Murray Woo, Chairman of the Manufacturers Council of PNG (MCPNG). A compromise, he suggests, might be to reduce only tariffs on goods PNG does not produce itself. MCPNG Chief Executive Officer Chey Scovell has pushed government to develop a model in which further reductions are tied to improvements to the business environment, such as improved trade-related infrastructures and the removal of red tape, and reductions in the cost of regulatory charges.

increasing the customer’s ability to access their bank account and save.

Reaching out While BSP dominates the retail and rural markets, its competitors have their own projects to reach out to remote communities. Westpac PNG recently introduced in-store banking in local trade stores in the New Ireland province, and the ANZ has introduced its own mobile phone banking technology. For its part, ANZ has set a target in 2013 of introducing mobile phone banking to 50,000 rural customers across PNG, Vanuatu, Samoa and Solomon Islands. BSP’s Komon predicts it will require a long-term investment in time and resources to educate PNG’s unbanked population of the benefits of joining the formal financial system and gain their confidence. ‘We are preparing the next generation of customers,’ he said.

Flow–on benefits Many manufacturers would like to see government do more to alleviate the many challenges they face, emphasising the tremendous benefits a local value-adding sector provides to the country. Employment is just the start, as Trukai’s Gregory WorthingtonEyre explains: ‘We employ 1000 people. You have the wantok system in PNG, where there’s a standard of one person supporting ten people. So, there’s 10,000 people that rely just on Trukai. If you take all the services and the distribution, shipping, stevedoring, packaging, transport, warehousing ... there are tens of thousands, probably 40,000 to 50,000 people that would rely on us.’ Viewed in this way, the effect of having major employers such as S P Brewery, Coca-Cola Amatil, Nestlé, Lae Biscuit Company, AkzoNobel and Goodman Fielder in the country is all the more significant.

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PNG Made campaign appeals to the hearts of consumers For several years, the Manufacturers Council of PNG has run a member-funded consumer awareness campaign—‘PNG Made’—to encourage Papua New Guineans to purchase PNGmanufactured goods.

‘We aim to get consumers’ emotions involved,’ says Murray Woo, Manufacturers Council Chairman about the campaign. ‘We want them to think: “My father works here, so I should support that business”.’

The campaign has involved radio and TV advertising and the use of a ‘PNG Made’ logo on everything from clothing to cola, and industrial cleaners to canned tuna.

Council surveys suggest the campaign has been effective, with 95% of consumers now able to identify the ‘PNG Made’ brand.

To qualify for use of the ‘PNG Made’ logo, 50% of a particular product’s cost of production must have been incurred in PNG.

‘We always promote the logo. It’s on our uniforms, it’s on our signage,’ says Adrian Chow, General Manager of Council member Prima Smallgoods. ‘We always highlight it to our customers too, especially companies new to PNG: the message is they should buy more PNG products and use more PNG services.’

The PNG Made logo is now found on a wide variety of manufactured products.

Credit: PNG Springsmiths

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PNG’s demanding roads have created a manufacturing opportunity for PNG Springsmiths Ltd. The only spring manufacturer in the country, the company produces coil and leaf springs for vehicles from 4WDs all the way up to massive highway trucks. The springs pictured were manufactured for a construction company in the southern Highlands—a typical job in a country where broken equipment can otherwise result in major delays while parts are brought in from overseas.

Then there’s the other contributions employers make: on-site skills development, training and education, healthcare, community programs. Lae Biscuit Company, in common with many manufacturers, supports a number of community and sporting groups. And then there’s the support for small local businesses, which supply goods and services to manufacturing operations. ‘Wherever possible, we source locally,’ says Laga Industries Paul Robinson. There’s also the issue of food security.

‘If we don’t have the proper manufacturing facilities here in the country, it’s a big risk for the population,’ says Prima’s Adrian Chow. ‘You have to have diversity of supply.’ S P Brewery’s Stan Joyce sums up nicely why PNG needs a manufacturing sector more than ever. ‘If you didn’t have a manufacturing sector in Papua New Guinea, what would we look like? Obviously, if you just had a sales office here, you wouldn’t have the 400 employees that we have now. And they wouldn’t be spending money in the community.’

Credit: K K Kingston/Rocky Roe

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Lae-based manufacturer K K Kingston is just one of a number of manufacturers making major investments in new plant.

PNG manufacturers’ vote of confidence While Papua New Guinea’s economy has slowed in the past year, many of the country’s manufacturers continue to see growth as the longer-term trend, and are investing in new plant, new products and new marketing approaches.

‘W

e’ve probably injected more capital into this business in the last three years than we have previously—a combination of replacing ageing equipment and also putting more advanced technologies into our plant,’ says Goodman Fielder AsiaPacific’s General Manager for PNG, Peter Tannahill. The food manufacturer is in the process of finalising the construction of a brand new snack plant in Lae, consolidating its manufacturing sites in that city into one location. ‘It’s a combination of getting everything onto one site, but also upgrading our existing facility,’ says Tannahill, who indicates the company will be continuing to invest in capital

expenditure over the next couple of years. Goodman Fielder’s move follows on from that of Lae Biscuit Company, which has reaped the benefits of its major new factory since it opened in Lae in 2010. Companies to open significant new plants in Lae (PNG’s industrial hub) in the past year include meat processor Prima Smallgoods (see page 14) and fish-canning joint venture Majestic Seafoods (see page 16). Meanwhile, local food manufacturer Paradise Foods is building a major new bottling plant in the city, as part of its ongoing plans to re-launch the Pepsi-Cola drink brand in PNG (see page 15).

‘Companies to open new plants in Lae in the past year include Prima Smallgoods and Majestic Seafoods.’

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Prima Smallgoods: big aspirations Credit: Prima Smallgoods

Lae-based food manufacturer Prima Smallgoods has recently completed a 40 million kina (US$15.82 million) upgrade to its manufacturing operations. The company’s General Manager, Adrian Chow, says the investment was made to take advantage of Papua New Guinea’s expected long-term economic development, with the manufacturer anticipating a surge in domestic demand for nonstaple and value-added food options. ‘As disposable income increases, we expect people to have a greater demand for processed meat products,’ he says. That’s not to say that things aren’t already going strong for the fast-growing company, which has a 40-year history in Papua New Guinea. Its current customer base includes the catering providers for Papua New Guinea’s major resources projects, as well as a range of wholesalers and supermarkets, which supply Prima’s lowerpriced saveloys and sausages to the mass market. The newly-upgraded manufacturing facility, opened by Prime Minister Peter O’Neill in September 2013, includes new processing equipment that can deliver consistently high-quality products and allows for comprehensive data collection. . Chow says the new plant also creates a much safer and pleasant working environment for the company’s 230 staff. ‘Our objective was to build a modern manufacturing facility of a scale and standard not seen in Papua New Guinea before,’ he says. ‘The design and equipment allow our staff to perform their tasks more efficiently and safely.’ The resulting improvements will enable Prima to provide a highquality local alternative to imported smallgoods.

Brewer’s rise Based on increased demand for beer and other beverages, S P Brewery has involved in a major multi-year capital investment program for its plants in both Lae and Port Moresby. General Manager Stan Joyce expects the upgrades to be completed by June 2014. ‘If you don’t replace equipment every now and again, it becomes inefficient. So there are efficiency gains, there’s a greater diversity of products and of packaging configurations,’ says Stan Joyce.

New products, higher quality Another Lae-based company, industrial and household supplies manufacturer K K Kingston, has ‘returned to our core business’ in 2013, according to General Manager, Michael Kingston. A key part of this is a program of restructuring and rationalisation. ‘Our Speedway project continues to progress. This is a project to consolidate all our Lae operations onto one new green-field site on the outskirts of Lae,’ he says. Kingston is also expanding its range of products. ‘We have introduced a number of new and updated products in 2013. This includes a new paper towel product, a new toilet paper product and a new-formula laundry detergent powder to upgrade our current product,’ explains Kingston. 14

Prima Smallgood’s upgraded plant in Lae.

‘We believe that our new facility’s standards are better than some of the processing facilities in Australia. So, our customers can no longer use quality as an excuse to buy from overseas suppliers,’ Chow says. The benefits of such a major private investment are also expected to flow through to the local piggeries and farms that form part of Prima’s supply chain. Prima’s investment may also enable a move into exports. ‘At the moment, we’re not exporting because we are trying to concentrate on the Papua New Guinea market, but there is a possibility in the future with this new plant,’ Chow says, noting that the Solomon Islands offers a natural fit for Prima’s products.

‘We expect to bring six to 10 new products to market in 2014.’ Chicken producer Tablebirds is another company embracing higher quality, and is currently certifying its processing plant to meet international standards. ‘It means we can be able to sell our products to local markets including the mines, gas, oil and extracting industries, as well as obtain opportunities if they present themselves for export,’ says Dr Keith Galgal, Mainland Holdings Limited’s Corporate Affairs and Research Manager.

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Paradise Foods marks 80th year with expansion plans Papua New Guinea’s oldest manufacturing company, Paradise Foods, is marking its 80th year of operations this year, after its humble beginnings as a small-town bakery in 1933. Behind the quiet celebrations are big expansion plans, according to Managing Director David Peate. Paradise Foods Limited has come a long way since it started as Morobe Bakery in the gold fields of Bulolo in 1933. Following a merger of Morobe Bakery and the Paradise Bakery Group in 1992, Arnotts Biscuits/Campbell Soup Company bought 80% of the company and changed its name to Arnotts Biscuits (PNG) Limited. In July 2007, Arnotts sold its stake in the company to then local minority shareholders, Nambawan Super Limited and Comrade Trustees Services Limited, which changed its name to Paradise Foods Limited, and appointed the incumbent Arnotts CEO, David Peate, as Managing Director.

‘We are currently investing in a multi-million kina bottling plant in Lae, which will be operational early next year. This further enhances PNG’s manufacturing capability and increases employment.’ Part of the company’s strategy is to help develop PNG’s agricultural and downstream processing sector. The company has invested in a pilot plant to produce chocolate using PNG premium cocoa beans under the name The Queen Emma Chocolate Company. State-of-the-art technology is used, allowing Paradise Foods to ‘use the whole bean without any additional cocoa butter, resulting in a very pure, rich taste’. The chocolate is currently only on sale in the duty free shops at Jacksons Airport and sells out quickly when in stock. Peate is expecting board approval to commission a commercialscale chocolate processing plant, with the range expected to be on sale, mainly as a premium export product, in early 2015.

Arnotts’ stewardship saw the commissioning of a new manufacturing facility in Port Moresby and a move into snack foods with the purchase of the popular Gold Nuggets brand. It is now one of PNG’s leading manufacturers, producing brands such as Nambawan, Wopa, Highway and Em Nau. ‘As a 100% Papua New Guinea-owned company, it has been our aim to grow the business and we are now also the PepsiCo bottler and distributor for Papua New Guinea,’ says Peate.

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Lae becomes regional fish-processing centre Lae is set to become the South Pacific’s main fish-processing centre, with the opening of one massive new cannery, the commencement of construction for another, and more on the drawing board.

Sylvester Pokajam, Managing Director of PNG’s National Fisheries Authority, told Made in PNG that the Majestic plant would eventually have the capacity to process 600 metric tonnes of tuna per day.

In June 2013, the Thailand fishing company, Thai Union, opened the region’s biggest fish-processing centre, Majestic Seafood. On the same day, Prime Minister Peter O’Neill turned the soil for another new plant—a joint Taiwanese-Filipino partnership involving Frabelle Fishing Corporation—which will process 200 metric tonnes of fish per day when it opens.

He said the plant has ‘the most advanced tuna processing equipment’ in the world. Majestic Seafood joins two existing processing plants in Lae, run by International Food Corporation and Frabelle. As well, three more canneries are planned.

Majestic Seafood is a joint venture between Frabelle Fishing Corporation of the Philippines, Philippine-based Century Canning Corporation, and Thailand’s Thai Union Corporation (a subsidiary of Thai Union Frozen Products—the largest tuna canner in the world). In its first phase, the plant will process 150 metric tonnes of tuna per day, employing 2500 people. That will rise to 350 tonnes per day when the second phase is completed in three-to-five years.

The Chinese-owned Zhoushan Zhenyang Deep-Sea Fishing Company plans to build a tuna loin plant to process 250 to 300 metric tonnes per day, employing 3000 local workers. The Korean firm Dongwon is also seeking to build a tuna loin plant, while Nambawan Seafood, a joint venture between Trans Pacific Journey Corporation and TSP Marine of the Philippines and a Taiwanese company, is also on the drawing board.

Fish processing is a growing sector in PNG.

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Manufacturers seek level playing field on cheap imports Cheap imports into Papua New Guinea are posing an increasing threat to local producers, with reports of foreign companies ‘dumping’ goods in PNG or under-declaring the value of imports.

mports are essential for any economy to function properly, but dumping—the importation of goods at or below their cost of production—is causing headaches for some of PNG’s producers. The General Manager of Goodman Fielder’s operation in PNG, Peter Tannahill, estimates the company loses significant sales volume as a result of cheap and inferior flour imports. When flour is transported in containers across the oceans and then sits on wharves for an extended period of time, it starts to deteriorate, he says.

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Tablebirds seizes power to compete Credit: Tablebirds

Mainland Holdings is one of PNG’s largest agribusinesses, with a strong focus on poultry and eggs for domestic consumption, merchandised under the high-profile Tablebirds brand. However, its major competition comes not from other domestic producers, such as Zenag Chicken, but from imported poultry products from Australia and New Zealand. Mainland’s Corporate Affairs and Research Manager, Dr Keith Galgal, explains the challenge for local producers: ‘Imported products are landed in Papua New Guinea at costs lower than our costs of production, so the first thing we have to do is look at ways we can reduce our cost of production—to be competitive without comprising quality.’ The company is looking to reduce the cost of stock feed by using local alternatives to imported wheat and soy bean, such as cassava root flour and fishmeal, a by-product of PNG’s fastdeveloping fish processing industry. Other major costs, such as power generation and security services, will also need to be addressed to reduce cost of production and improve competitiveness.

‘We have a lot of flour that comes in, and quite honestly people get lured into buying it at very, very cheap prices. Often it’s because overseas suppliers are trying to clear it because they’ve carried it for a couple of weeks or a couple of months and its starting to deteriorate. So, they start dumping it in the market, and it causes absolute chaos.’ Rice producer Greg Worthington-Eyre from Trukai Industries sees blended varieties, ‘broken’ rice used in desserts, and the threat of cheap rice from Thailand as changing the dynamics in the lower end of the market. He says the Thai government has been buying and storing rice worth about US$ 25 billion, expecting prices to rise.

Impact on livestock While he does not regard it as dumping, Phil Leahy, Managing Director of Zenag Chicken, says the importation of cheap poultry has meant Zenag will be winding down its chicken farming and processing section. Another chicken producer, Mainland Holdings-owned Tablebirds, is also affected by cheap imports, according to its Corporate Affairs and Research Manager, Dr Keith Galgal (see box above). Michael Kingston, General Manager of industrial supplies manufacturer K K Kingston, says cheap imported toilet paper is the main product category affecting his business. ‘Toilet paper is also used by some companies to top up a container, they are then happy to distribute it in the market very cheaply,’ he says. Meanwhile, Stan Joyce, General Manager of S P Brewery—PNG’s only major brewer—points out that excisable products such as beer are protected from cheap imports or dumping. Nevertheless, he is adopting a wait-and-see attitude towards its recently-launched Heineken brew ‘as to whether or not people try to do that to us.’

‘We rely heavily of diesel generators for all major establishments such as processing plants. Quality of power is critical to our business because any blackouts and power surges will greatly affect our delicate and expensive electronic control systems in the processing plants. Any break down in quality power supply means lost in production and low income,’ says Dr Galgal. ‘We have already done our audit on our current power usage and our future needs for power. By definition, we are an independent power producer. We are looking at options for producing power cheaply or buying from those who can supply it at a cheaper rate.’

Falling tariffs threaten sector While he acknowledges that imports are an inevitable part of the competitive landscape—and, in many instances, in the best interests of consumers—Murray Woo, Chairman of the Manufacturers Council of PNG, says his members want a level playing field, so they can compete effectively and to continue to provide employment to Papua New Guineans. The high cost of doing business makes things hard enough for manufacturers as it is, but an area of particular concern is falling tariffs. Under APEC, of which PNG is a member, tariffs are due to disappear altogether by 2020. ‘We don’t want tariffs to come down any further. They’ve already dropped by about 80% since the 1990s,’ says Woo. ‘Even with tariffs averaging 20%, imports are still typically 15% cheaper as it is.’ Woo believes a compromise would be to reduce tariffs on those goods PNG does not produce, which would deliver lower prices on many imported goods, while still supporting local industry.

Port Moresby docks Credit: PNG Ports

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Taking PNG produce to the world Papua New Guinea’s non-mineral commodities and processed goods are exported all over the world.

hile Papua New Guinea is best known as an exporter of mineral resources—copper, gold, silver, nickel and (starting in 2014) liquefied natural gas—it is also one of the region’s major exporters of agricultural commodities, timber and fish. Its main agricultural exports include palm oil, coffee, cocoa, copra, rubber, spices and tea.

Palm oil leads the way The sustainable production methods employed of PNG’s palm oil sector have led to major exports to the European Union— around half a million tonnes of oil annually, making palm PNG’s number one agricultural export. Indeed, New Britain Palm Oil Limited, the country’s largest exporter, even has its own processing plant in Liverpool, England to handle the steady demand efficiently.

Credit: R D Tuna

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PNG’s tuna industry has special tariff-free access to the EU’s 500 million population through a special Economic Partnership Agreement.

The EU is also a vital market for PNG coffee and tuna. While there is a growing demand for single-origin PNG coffee beans from the world’s coffee roasters, much of PNG’s coffee crop is sold in bulk to Europe’s three coffee giants: Ecom, Volcafe and Neumann Kaffee. PNG Coffee is also exported to the United States, Australia and Japan.

Major source of tuna

‘Between 12% and 17% of the world’s tuna catch is caught in PNG waters’

Meanwhile, between 12% and 17% of the world’s tuna catch is caught in PNG waters and the bulk of this is exported. PNG’s tuna industry has special tariff-free access to the EU’s 500 million population through a special Economic Partnership Agreement—an arrangement that has helped to build a healthy fishprocessing industry in the Momase region on the north coast of PNG’s mainland. PNG’s tuna processors have the natural advantage of being very close to the Pacific’s tuna grounds, allowing for a shorter time between the catch and its actual processing. PNG’s timber is mostly exported as raw logs, although some processed products such as sawn timber, veneer sheets, plywood and even furniture—produced, for instance, by companies such as PNG Forest Products and Cloudy Bay Sustainable Forestry—are also exported. About 80% of timber exports go to China, Korea and Japan.

Manufactured exports Due to the relatively high cost of doing business in Papua New Guinea, and its lack of scale compared to neighbouring Asia and Australia, exporting manufactured goods have proved more problematic. PNG’s manufacturers have therefore concentrated on niche opportunities in neighbouring markets. 20

‘If you look at our neighbouring markets, they’re either smaller or extremely competitive or both,’ says Stan Joyce, General Manager S P Brewery, which exports its popular S P Lager to northern Australia. ‘Australia is a very, very tightly-held market. Through our parent company, we’re in the Solomon Islands, so that really leaves Fiji and then that’s about it.’ Michael Kingston, General Manager of industrial and domestic supplies manufacturer K K Kingston, says export is a small but significant part of its business. ‘We currently export to South Pacific islands, predominantly Solomon Islands and Vanuatu. We export consumer retail products and commercial chemicals.’ Paradise Foods and Lae Biscuit Company are two other exporting manufacturers, selling a wide range of biscuits and snacks across the Pacific islands, while PNG Taiheyo Cement exports to the neighbouring Solomon Islands, Vanuatu and Micronesia. Meanwhile, fish canners such as Frabelle are exporting the by-products of their processing as stockfeed and chickenfeed.

Competitive edge Kingston identifies a key issue for PNG companies looking to export their goods. ‘It is still hard to compete. We have not seen any benefit from any of the recently touted free trade agreements,’ he says. For some food manufacturing industries, quarantine regulations and international pricing arrangements provide tough entry requirements into other markets.

F e at u r e

Rising to the challenge

S P Lager is exported to Australia and Fiji.

Credit: S P Brewery

Credit: Laga Industries

Nevertheless, some manufacturers are rising to the challenge, on the back of new investment in higher-quality manufacturing equipment and more efficient processes. A major upgrade of the Lae manufacturing facilities of Prima Smallgoods will enable it to produce export-quality processed meats (see page 14), while Paul Robinson, National Operations Manager for Laga Industries, says the ice cream manufacturer is looking at exporting within three years, once it has achieved ISO (International Standards Association) accreditation. Chicken producer Tablebirds is also planning to export, according to Corporate Affairs and Research Manager Dr Keith Galgal. By early 2014, Tablebirds will have installed a completely new spiral freezer, new coolers, processing lines and a control system, thus bringing its facilities up to export standard.

Laga Industries is looking to export PNG-made ice cream in the next three years.

MANUS

Papua New Guineaâ&#x20AC;&#x2122;s Provinces & key produce

Marine products

WEST SEPIK (SANDAUN) Gold, copper, forestry, marine products

EAST SEPIK Fisheries, forestry, vanilla, cocoa

INDONESIA

M O M A S E

Bismarck Sea

MADANG Fish processing, sugar, nickel, cobalt

ENGA

Madang

WESTERN Gold, silver HIGHLANDS Coffee, tea JIWAKA HELA

Mount Hagen

Oil/gas

HIGHLA N D S

CHIMBU (SIMBU) Coffee

SOUTHERN HIGHLANDS Oil/gas

WESTERN PROVINCE

WES

Coffee, tea

Goroka

EASTERN HIGHLANDS Coffee

GULF

Copper/gold, forestry, aquaculture

Oil/gas, marine products

S OUTHE R N

Gulf of Papua

Lae

MOROBE

Manufacturing, logistics, coffee, livestock, fish processing, forestry, gold, copper

CENTRAL Fisheries, forestry, gold, rubber

Daru

NORTHERN (ORO PROVINCE) Palm oil, coffee, cocoa, copra

Port Moresby

Torres Strait

AUSTRALIA

NATIONAL CAPITAL DISTRICT Manufacturing, logistics

Kavieng

NEW IRELAND Gold, marine products, forestry, palm oil, cocoa, copra

Kokopo

EAST NEW BRITAIN Cocoa, copra, forestry, gold, organic spices

Kimbe

N E W

ST NEW BRITAIN

Palm oil, forestry

GUINE A

IS LAND S BOUGAINVILLE (AUTONOMOUS REGION) Copper, cocoa, copra

Solomon Sea

Coral Sea Alotau

MILNE BAY

Copra, coffee, cocoa, spices, marine products, gold, forestry, oil palm

Credit: Tablebirds/Mainland Holdings

Ag r i b u s i n e s s

Agribusiness

Women in an oil-palm seedling nursery

Credit: NBPOL

Credit: Paradise Foods

Credit: NBPOL

Tablebirds’ poultry operation in the Markham Valley, Morobe Province

Queen Emma Chocolate, made locally from PNG cocoa

apua New Guineans are a nation of farmers. While agriculture accounts for about 25% of PNG’s GDP, about 85% of nationals are engaged in food production at a subsistence level. Palm oil is the country’s most valuable crop, followed by cocoa, copra, rubber, spices and tea. Between 2001 and 2010 PNG’s soft commodity exports grew in value by 12.8% per annum to almost K4 billion for the first time, with forestry being a significant contributor to this growth. The key commercial livestock in PNG are pigs, poultry and cattle, with livestock contributing 13% of total domestic food production.

Cattle in New Britain

Key Facts Palm oil

550,000 tonnes exported in 2012. Produced mainly in West New Britain, Oro, Milne Bay Provinces.

Coffee

About one million bags of green beans exported annually. Main buyers are Germany, United States, Australia, Japan.

Cocoa

K320 million exports (2011) Grown organically and highly prized by chocolate makers. Queen Emma chocolate now produced within PNG by local manufacturer Paradise Foods.

Copra

K331m exports (2012)

Spices

Cardamom, vanilla, chillies

Picking coffee in PNG’s Highlands

Green PNG coffee beans

Roasting coffee beans

Ready for sale

Credit: ADB/Ian Gill

Credit: Mainland Holdings

Credit: Manufacturers Council of PNG

Credit: Paradise Foods

Ag r i b u s i n e s s

PNG cocoa

Falling prices no cause for panic Agricultural commodity prices fell heavily during 2013. Made in PNG examines what this means for Papua New Guinea’s agricultural producers.

oft commodities such as palm oil, cocoa and coffee were all swept up in the mid-2013 selling that followed comments from the United States’ Federal Reserve Chairman Ben Bernanke about tapering stimulus of the US economy. But, despite the sharp reaction in financial markets, analysts say the medium-term outlook has not changed dramatically. For Papua New Guinea’s key agricultural exports, changes in investor sentiment can have ripple effects through the commodities world, but the fundamentals of supply and demand do prevail. ‘If there is bearishness in grain and oilseed prices, that influences palm oil,’ Rabobank senior industry analyst Pawan Kumar told Made in PNG. ‘But the biggest factor for palm oil is the oversupply that has been the case for the last 10 months or so.’

‘Cocoa is the only commodity at the moment which is looking bullish, the reason being that demand is slightly higher than production,’ he said. The current crop in Indonesia, which is forecast at 435,000 tonnes or just over 10% of global production, is expected to decline slightly from last year due to disease and other issues, while demand continues to rise. PNG farmers may be well placed to take advantage of higher prices, if they can address pest-related issues (see page 30).

Dramatic moves The moves in financial markets were more dramatic than many economists expected. Just as extra cash pumped into the banking system over recent years has helped to fuel recovery in stock markets and commodities prices, investors now fear that a reduction in liquidity will slam the brakes on the US economy, and lead to a wider global slowdown.

‘The outlook for demand and prices will improve in 2014.’

Palm oil stocks Even though stock levels have declined somewhat in key producing nations such as Malaysia, which would normally help prices, palm oil prices remained flat because of expectations of another strong production cycle in the second half of 2013. Kumar said China’s stock of palm oil imports was 55% higher in May 2013 than a year ago, and Chinese imports were likely to slow as the nation buys more soybeans in coming months. The price of palm oil has slumped some 35% over the past year.

Cocoa to improve Cocoa, another key commodity for Papua New Guinea’s farmers, should see prices improve, according to Kumar. 26

‘Don’t panic’ But the knee-jerk reaction that hit markets from Wall Street to Tokyo and Sydney may have been overdone, argues Sydney-based Westpac senior economist Justin Smirk. He says the outlook for demand and prices will improve in 2014. Rather than a long-term downtrend in commodities markets, Smirk argues that volatility will become the norm as uncertainty over the strength of recovery persists. ‘What we are going to see is swings between euphoria and depression.’

Credit: Bob Elvin

Ag r i b u s i n e s s

How climate change will affect Papua New Guinea agribusiness Bob Hansen considers the threats and opportunities to Papua New Guinea from climate change.

he world’s climate is changing and most of us are aware of this fact. The Earth has gone through very warm periods (22°C some 50 to 70 million years ago) and very cold periods (6°C some 600,000 years ago). The average global temperature is currently 14°C. Historically, most of this variation was caused by the elliptical orbit the Earth takes around the Sun or by the release of carbon by extreme volcanic periods such as the uplift of the Himalayas 60 million years ago. By studying the effects of these historical events, we have a good understanding of what the impacts of rising global temperatures caused by the release of carbon may have for the future of the Earth, and thus the impacts on industry.

Climate projections The history of climate science is relatively recent. The first scientist to publish on the subject was probably Svante Arrhenius who, in 1896, postulated that ‘the human emission of carbon dioxide would be strong enough to prevent the world entering a new Ice Age’. Arrhenius’ greenhouse law is still used today. More recently, the 1979 report by the United States National Academy of Science predicted that carbon dioxide in the atmosphere would double from its pre-industrial levels by about 2035. (Today, it’s expected this will happen by about 2050, depending on the scenario or model.) A doubling of carbon dioxide would lead to an average warming of the planet of 2°C to 3°C. The polar regions would warm by approximately 12°C and the tropics by less than 1°C. These predictions are already coming true, with record meltings of the Arctic Sea ice during summer. More recently again, the Intergovernmental Panel on Climate Change’s models predict a global average warming of 1°C to 4°C by 2100.

The impact on PNG’s climate

Credit: Mainland Holdings

The 2011 Pacific Climate Change Science Program report found that, for Papua New Guinea:

Increased rainfall will raise river levels in the Sepik River, which could affect the supply of crocodile eggs and hatchlings.

Flooding along the Erap River in Morobe Province

• Temperatures would rise by between 0.4°C and 1.0°C by 2030. • Annual rainfall would increase, with more extreme rainfall events. • Sea levels are rising at 7.0 mm a year in the vicinity of PNG, double the global average of 2.8mm to 3.5mm a year. • The sea level is affected by the El Niño-Southern Oscillation phenomenon. This is a rise of 140mm in the past 20 years.

Implications for PNG’s economy The effects of these forecasted changes are many and significant. Some of those changes are: • Increasing incidence of malaria in the Highlands (Mueller, 2007), now an annual event. • Regions like Lae will be wetter and therefore the Lae roads, Highlands Highway and Wau/Bulolo road will require increased maintenance due to wash-outs. The rainfall in Lae has increased by approximately 500mm per annum or nearly 11%. This is consistent with projected rainfall for the tropics (Seager, 2007 and IPCC, 2007) and rainfall trends in Northern Australia. • The production region for coffee and cocoa may expand with increased rainfall but there will also be increased disease challenges with higher humidity in current production regions. • Civil engineers will need to take into account the increased river flows in road and bridge designs, as wash-outs will increase. • Rubber farming may become unviable as the latex is washed out of the cups on the trees. • Palm oil production (Duncan, 2007) will benefit from the increased precipitation and the viable production areas will possibly expand. Palm oil production will be a potential winner from climate change. • The price of agricultural commodities will rise and be more volatile, as there will be increased demand and more weather events (too dry or too wet) impacting on the supply chain dynamics. • Increased rainfall will raise river levels in the Sepik River, which could affect the supply of crocodile eggs and hatchlings. • The increased atmospheric carbon will benefit those crops that are C4 convertors such as maize, sorghum and sugarcane, while C3 convertors such as wheat and rice will be subject to yield declines. • Sea level rise will impact coastal communities. Houses and gardens will have to be moved to higher ground if possible and island communities relocated to the PNG mainland. These will create social problems for many of these communities. A good example is the Salamaua Isthmus in Morobe Province, which has been substantially eroded in the past 20 years. In summary, the impact of climate change will have significant financial implications for PNG. There will be winners and losers and they are not all apparent presently. Additional budgetary funds will be required for infrastructure upkeep and relocation of infrastructure. Bob Hansen is a former Managing Director of PNG agribusiness Mainland Holdings, and an Adjunct Associate Professor at the University of Southern Queensland’s Australian Centre for Sustainable Business Development. 27

Ag r i b u s i n e s s

Entrepreneur: Jerry Kapka of Kongo Coffee Ltd When Jerry Kapka began his working life as a teacher, he never anticipated that one day he would own one of Papua New Guinea’s leading coffee companies, writes Sonja Heydeman.

n 1999, Jerry Kapka established Kongo Coffee Ltd, which is now Simbu Province’s premier coffee company, with a strong export market. Coffee growing now provides livelihoods for an estimated 300,000 people in Simbu. ‘The major export destination is Germany, followed by the United States, Japan and Australia,’ Kapka tells Made in PNG. To keep up with international demand, Kongo Coffee is now in the final stages of completing its new processing line and upgrading its existing line. ‘This will give us the biggest, best and most modern coffee mill in PNG, doing eight tonnes per hour,’ he says. Kapka predicts the upgraded facilities will increase export volume from around 3600 tonnes to over 7000 tonnes annually. Kongo Coffee’s turnover is dependent on international prices. In 2011, prices were high, with turnover surging to K50 million (US$23 million), while a drop in 2013 saw turnover reduced to around K30 million (US$14 million).

Satisfied customers

‘He’s always performed 100% according to the contracts … after 13 years, it’s a very good relationship … He’s such a great, honourable and trustworthy person and that’s what this business is all about,’ says Lackner.

Sole provider As the major and only active coffee company in Simbu Province, Kongo Coffee has an important role in bringing cash to local people through its commitment to paying the highest possible prices to its growers. Kapka credits his ability to stay focused as a key to his enduring business success: ‘I’ve always concentrated on coffee and I think this has taken Kongo Coffee to where it is now,’ he reflects. Sonja Heydeman is a freelance journalist with an interest in the Pacific.

Credit: Kongo Coffee

One of Kongo Coffee’s major buyers is the Hamburg Coffee Company, on board since 1999. The German company’s main focus is PNG’s standard smallholder-grown product, known as Y-Grade. Hamburg Coffee Company’s Senior Trader Michael Lackner says he believes his company opened up the market for Kongo Coffee, and the relationship with Kapka has thrived.

Jerry Kapka of Kongo Coffee

A range of Kongo Coffee products

Credit: NBPOL

Ag r i b u s i n e s s

Palm oil is now PNG’s number one agricultural export.

The inside view: Give Papua New Guinea agriculture the break it needs Paul Barker argues for a far greater emphasis on Papua New Guinea’s largest and most widespread economic activity—agriculture.

ip service is often paid to the importance of the agricultural sector, which provides the livelihoods for over 80% of Papua New Guinea’s population. Concern is also expressed at the level of urban population growth and the limited capacity of PNG’s towns to absorb such numbers. Yet, for years, successive governments have largely ignored the needs of rural households. The sector’s institutions certainly need reform to make them accountable, principally to PNG’s own farmers. Some can certainly be merged, and the Department of Agriculture and Livestock converted into a largely producer-controlled, professional and responsive organisation. But neither agriculture’s prospects, nor other industries’ (including manufacturing or tourism), can be guaranteed unless the economy is competitive. The O’Neill Government’s commitment and focus on infrastructure, law and order, education and health, and especially shifting funds to the Districts, sustainable development and diversification is a welcome and overdue shift in favour of ordinary PNG households and rural areas, including suffering farmers (if the capacity is there to implement the bold aims). Whether they are rural or periurban farmers/gardeners, PNG’s producers require:

undermining farmer prices and returns. • safety, security and low risk of produce theft • availability of quality and pest/disease-resistant planting material • skills (in production, marketing and business) • market information and know-how, especially entailing new material or how to add value • access to improved producer support, through cooperatives, group marketing and private partnerships • access to savings, credit and advice • risk minimisation through crop diversification, stabilisation or support arrangements when prices fall below a certain threshold, and insurance. PNG has millennia of agricultural production and skills behind it. It has good agricultural land. The country has no option but to foster its agricultural sector and associated downstream processing and value-adding, both as it provides sound long-term and broad-based opportunities for the majority of the population, and also because there are no options to absorb its fast-growing workforce for the foreseeable future. The cost of living is extraordinarily high, even for a developed country. Going for top-quality niche products is one way to overcome high costs, but it’s crucial that these overall costs are reduced to really increase opportunities. Many of these costs fall in the category of ‘public goods’ provided by the State. Poor roads, policing, utilities, extension services etc. undermine business and opportunities, but could be addressed if government uses its revenue much more effectively and accountably. Now is the chance for government to demonstrate that it recognises the critical role of agriculture in providing broad household needs and income, as well as 30% of GDP and sustainable production and exports.

‘PNG has millennia of agricultural production and skills behind it.’

• land (usually just a few hectares), with adequate tenure security to make long-term commitments • market access (that they are sufficiently close to market outlets, or a reliable road, air or shipping service to get produce out without it deteriorating unduly) • adequate price, which in turns requires • suitable and consistent world or local market, which in agriculture is often not the case. Stabilisation schemes were provided hitherto in PNG for some major crops to reduce price/income fluctuations • suitable exchange rate (i.e. that the kina is not too strong against the currency—often US dollars for cash crops—in which the product price is set). With major influxes of foreign exchange into PNG for resource projects, the kina tends to appreciate,

Paul Barker is Director of the Papua New Guinea Institute of National Affairs, a privately funded, non-profit think-tank based in Port Moresby.

Ag r i b u s i n e s s

Saving PNG’s cocoa industry Despite growing demand for cocoa around the world, the cocoa industry in Papua New Guinea is in crisis, with production in East New Britain alone plummeting by 82% between 2008 and 2012. Made in PNG reports on attempts to combat the pest that threatens the sector.

he cause is the cocoa pod borer (CPB) pest, which has hit many cocoa-producing regions around the world. According to the PNG Cocoa Board, production in East Sepik Province and the Autonomous Region of Bougainville ‘will likely crash’ over the next two years, all due to the pest. Receipts from cocoa exports halved between 2011 and 2012, but with cocoa prices expected to rise, the revenue lost will become even more apparent. In the season ended 30 September 2013, world demand outpaced production by 160,000 tonnes, according to the International Cocoa Organisation (ICCO). As a result, analysts now predict cocoa prices may rise to US$3090 per tonne by January next year, a US$200 per tonne rise.

Fighting the borer The CPB will never be eradicated, but its impact can be overcome, says Professor George Curry from Curtin University, Perth. Curry and his Curtin and PNG Cocoa Coconut Institute colleagues are currently researching the success of training programs for growers initiated by Agmark, the PNG cocoa buying and exporting company. The research, funded by the Australian Centre for International Agricultural Research, seeks to identify strategies that allow growers to produce cocoa in a CPB environment. As well as providing high-yielding varieties of cocoa, Agmark trains growers in such things as pruning, good block sanitation and CPB control techniques like weekly harvesting and pod burial, which

interrupt the life cycle of the pest. These measures can eliminate as much as 98% of CPB infestation. ‘It’s probably been the most successful strategy to overcome CPB,’ Curry tells Made in PNG. Just over 1000 of East New Britain’s 23,000 growers are taking part in the trial and most of them are getting higher yields now than they were even before the pest arrived. ‘Typically, before CPB they were getting 300-400 kg of dry bean per hectare. And then with CPB hitting, it almost went down to zero but under the Agmark strategy, a lot of growers are getting a tonne per hectare; some a good bit higher than that.’

Intensive effort ‘The big problem with CPB is that it requires a high input system of production to control it,’ says Curry. ‘The thing with most smallholder production in PNG, including oil palm and coffee, is that they operate in a low-input, low-output system of production. Curry says growers need to put more time into maintaining their crops. ‘Even with basic pruning, you can really rack up the yields because cocoa responds really well to pruning and shade control. ‘However, it requires a fundamental change in the way people live their lives, so it’s a difficult thing for growers to do. The farmers who’ve made the transition in East New Britain are getting good returns. In fact, a lot are amazed at how much cocoa they’re getting.’

Rimbunan Hijau Group (R H Group) has long been recognised as a major player in PNG’s forestry sector. In recent years, the company has also diversified into several other key national industries, including commercial agriculture.

Credit: R H Group

R H Group expands into palm oil

The company’s largest current agricultural project is the Sigite Mukus Integrated Rural Development Project in East New Britain, which will include oil palm plantations and processing facilities. Not only will this development directly employ up to 3500 people and contribute over 33 million kina per year to the East New Britain economy, local smallholders will benefit from receiving training and inputs to help them cultivate oil palm, as well as a guaranteed buyer for their fruit. The project enjoys broad local support, and represents early investment of more than 700 million kina (US$281 million) including the construction of two palm oil mills. Sigite Mukus is expected to contribute royalties, premium payments, infrastructure levies and other community funding worth 834 million kina (US$335 million) over the project’s lifespan. The project currently employs over 1000 local people, with this number expected to triple over the next three years.

R H Group’s Sigite Mukus Integrated Rural Development Project in East New Britain

The project’s planned construction of a regional road network will connect the project area with villages and urban centres. Project spending on the local road network over the next 25 years is likely to outstrip government spending on roads in the area. The project’s planned social contributions include education and health facilities, which will support local development and provide greater opportunities for young people in the region. Sigite Mukus represents a new agricultural project for RH, and a great opportunity for the people of East New Britain.

Fisheries

Credit: R D Tuna Canners

Credit: International Food Corporation

he waters around PNG contain an enormous array of fish species. More than 10,000 fish species have so far been identified, but commercially, the most important is the migratory tuna. Between 12% and 17% of the world’s tuna is caught in PNG’s 2.4 million square kilometre Exclusive Economic Zone. The fishing industry has grown from a dependency on access fees in the early 1980s to a more diversified sector, with significant downstream processing today. Sylvester Pokajam, Managing Director of PNG’s National Fisheries Authority, says there will be six processing plants within the next few years, potentially employing 50,000 workers. In 2013, the Thailand fishing company, Thai Union, opened the region’s biggest fish processing centre, Majestic Seafoods in Lae. Meanwhile, R D Tuna’s Managing Director Pete Celso says his company expects to double

Credit: PNGTPA/David Hannan

Credit: Manufacturers Council of PNG

Lobster tails ready for export

production when it opens a second cannery in Madang in early 2014. Small-scale coastal commercial fishing focuses on prawns, crayfish, barramundi, bêche-de-mer, trochus shells, pearl shell and green snail. Key Facts Tuna catch

580,000 tonnes

Potential catch

720,000 tonnes

Export income

K215 million (US$85.6 million) (2012)

Markets

Hong Kong, Japan, Australia, European Union

Special access

An Economic Partnership Agreement gives PNG tariff-free access to the EU

Processing plants operating

Plants planned

Fisheries

Some of Frabelle’s Isabella range of canned tuna.

Frabelle plans expansion beyond tuna processing Lae-based Frabelle Fishing Corporation is one of the major partners behind the Majestic Seafood venture, which opened in 2013. But Frabelle’s General Manager James Johnston says the company has big expansion plans of its own, too.

rabelle is one of three joint-venture partners in Majestic Seafoods, the new tuna-processing plant that was opened in Malahang, near Lae in June 2013 (see page 16). While tuna from the joint venture cannery will be sold by Majestic, primarily to the European Union, Frabelle itself will concentrate on selling to the local PNG market, through local wholesaler, Seeto Kui. At the same time, Frabelle has a program of investment that will see six of its 20 PNG-flagged catcher boats replaced over the next two years and the construction of a new wharf. ‘This means we are much more efficient with unloading our catch, missing out a few steps,’ Johnston said. A second wharf will commence construction early in 2014.

New equipment Boosting tuna output will also require the replacement of old equipment. ‘We’re doing major improvements in the factory,’ says Johnston of his facility in Lae. ‘In every area, we’re changing something to make it more viable— conveyor systems, new packing systems, new labelling systems. Because the processing plant is seven years old, it’s time for an upgrade. ‘We put in a new blast freezer that’s going to double our output of frozen lines. There’s a new 500-tonne cold room being finished off now. That’s at minus 35 [degrees Celsius], not at minus 25, because the colder you can keep yellow fin the better the yellow fin stays.’

Frabelle also now has a 300-tonne storage area for all its sunflower, olive and soya bean oils.

New products for export The next stage will be to build a second 3,000 tonne freezer. It will store ‘rawpacks’: single-cooked fish that customers can put on salads or eat straight away. ‘That’s a separate market,’ explains Johnston. ‘It only goes to France and Germany at this time.’ Frabelle is the only plant in PNG that currently does this. It also exports stockfeed and chickenfeed to the region.

Diversification Diversification is the name of Frabelle’s game. As well as the involvement with Majestic Seafoods, Johnston has also been talking to local governments around the country to set up co-operatives to bring coral and reef fish from places like Kavieng or Manus to Lae for on-selling. The company is also looking beyond fish processing: it is one of the tenderers for the new power station in Lae, and has installed a biomass boiler in Lae for which it will be buying coconut shell for fuel. All this is done without much fanfare, which is the way Johnston likes it.

‘In every area, we’re changing something to make it more viable’

Fisheries

PNG can be world tuna leader With the correct management, PNG can become the leader in the world tuna business, believes Chairman of the PNG Fishing Industry Association, Pete Celso.

ith average annual exports of at least 500,000 tonnes of tuna, PNG is already a major player in the world tuna trade, accounting for between 12% and 17% of the world’s tuna catch. Together with the Pacific’s other tuna–exporting nations—the Parties to the Nauru Agreement (PNA)—PNG accounts for about 35%. PNG’s importance could increase further if key reforms occur, according to Pete Celso, Chairman of the PNG Fisheries Industry Association. Improved scale in the industry is essential, to overcome some of the challenges of doing business in the country. This means more wharves, storage facilities and also more onshore processing, so that PNG realises more of the value of its catch.

More canneries With an additional three canneries being built and current operators expanding, this is starting to occur, and Celso has hopes that the planned Pacific Industrial Zone in Madang Province will further improve the situation, allowing operators to share infrastructure and make PNG’s northern coast a more cost-effective destination for international shipping. Tariff-free access to the massive European Union market through an Economic Partnership Agreement has provided a major fillip for PNG’s tuna exporters, and Celso told delegates of the 2013 Papua New Guinea Advantage Investment Summit in Port Moresby that the conclusion of a similar access agreement with the United States—the world’s largest single tuna market—was a key priority. ‘With a well-planned and successful tuna management and development in place that can address all issues in a balanced

The PNG Fishing Industry Association’s Pete Celso

manner, PNG can truly become the leader of the tuna business in the world,’ he told the Summit. ‘If Thailand can rake in billions of dollars without having a fishing ground and sets of fishing boats … why then can’t PNG make the same revenue and benefit out of its truly-owned resources and make Papua New Guinea the tuna capital of the world?’

Credit: Cloudy Bay Sustainable Forestry

Fo r e s t ry

Interior of prefabricated timber house

A prefabricated Managers House made in PNG Forest Products

Credit: Cloudy Bay Sustainable Forestry

fter Malaysia, Papua New Guinea is now the second-largest exporter of tropical hardwoods in the world, with about 15 million hectares of the countryâ&#x20AC;&#x2122;s 30 million hectares of total land mass considered suitable for forestry development. Products include raw log exports, sawn timber, veneer sheets, logs, plywood, processed timber and woodchips. The PNG Forest Industries Association says PNG has a number of competitive edges over other timber-producing countries, including A clock made from PNG timber

PNG-made office furniture

Credit: Manufacturers Council of PNG

Credit: Cloudy Bay Sustainable Forestry

Credit: PNG Forest Products

Forestry

Making plywood

Key Facts Export value

K536 million (2012, source: Bank of PNG)

Employment

approx 7,000 workers

Sawmills

Concessions

29. Dominant concession holder is Malaysiaâ&#x20AC;&#x2122;s Rimbunan Hijau, controlling more than 45% of exports.

Plantations

62,277 hectares worth US$41 million

New potential forestry products

eaglewood, sandlewood, rattan, medicinal plants, carbon trading

substantial wood and labour resources, and close proximity to world markets, including China and Japan for low-end products; and to Australia and the United States for high-value and value-added forestry products.

Credit: Manufacturers Council of PNG

Fo r e s t ry

The PNG Government is committing the forestry sector to 100% value-adding.

Forestry sector embraces sustainability

Papua New Guinea’s forestry sector is taking steps to ensure its wood exports to other countries meet European Union standards for sustainability.

he EU ruling (EU Timber Regulation No.995/2010) bans the importation of illegally harvested and produced timber products into EU markets. PNG’s direct exports of forest products to the EU are modest— just 0.2% of the exports in 2011. Of this, plantation-grown balsawood is the single largest export. However, the bulk of PNG’s timber finds its way into overseas markets via China, which bought 78% of PNG forest exports, mainly round logs, in 2011. Much of this timber ultimately finds its way into the EU in manufactured products.

Industry responding to challenge While any lasting effect of the EU ruling is likely to be on these particular exports, the industry is confident it is taking the right steps to mitigate the risk. ‘PNG is the only country in the world with 100% independent third-party monitoring of its log exports [by Swiss company SGS], so we are well placed to meet these emerging regulatory requirements,’ Bob Tate, Executive Director of peak industry body, the Papua New Guinea Forest Industries Association tells Made in PNG. ‘We are also working with China’s State Forestry Administration to make sure our systems are in sync with what they are doing.’ In addition, Tate estimates that 50–60% of processed timber exports—which go mostly to Australia, New Zealand and the Pacific—are produced by the companies that have adopted Forestry Stewardship Council (FSC), the Programme for the Endorsement of Forest Certification regulatory and traceability standards or the SGS TLTV system for certification.

The cost of certification Bob Tate expresses concerns about the costs of certification.

‘In PNG, most companies aren’t producing significant volumes. SMEs in particular will find it very hard to make the investment in those systems.’ Indeed, he notes that the International Tropical Timber Council has called on timber-importing countries to adopt common standards to make it easier for developing countries to comply. ‘It’s hard to know which regulation to comply with,’ he said.

SABL inquiry report The EU decision was followed in June 2013 by a report into the illegal allocation of land to forestry interests in PNG. The Commission of Inquiry into Special Agricultural and Business Leases (SABLs) detailed of the handling of 45 leases in the SABL system, which had been set up for agricultural projects, not forestry. The Commission found that only four had secured consent of local landowners and had viable agricultural projects. The report described a series of governance issues, including the lack of management and coordination by key government agencies, and undue political pressure on government officials to speed up SABL applications. Prime Minister Peter O’Neill told parliament that ‘the policy on SABLs has failed miserably’. ‘In other instances, the agency has simply failed to administer the law and applicants and developers have enjoyed a free run,’ said O’Neill in a statement. He said the Minister for Lands and Physical Planning would appoint a Task Force to identify a new legislative framework to: • provide for the conversion of customary land into leasehold land for the benefit of landowners; • protect the interests of landowners: and • ensure sustainable land use. 35

Credit: Cloudy Bay Sustainable Forestry

Fo r e s t ry

Loading logs for processing

Cloudy Bay wins full Forestry Stewardship Council certification Cloudy Bay Sustainable Forestry Ltd has achieved another milestone in its drive for sustainable development with the certification by the Forestry Stewardship Council (FSC) for responsible forestry management.

he company, wholly owned by Papua New Guinea Sustainable Development Program Ltd, had previously received certification for controlled wood and chain of custody in 2011. ‘This certification proves that it is possible in PNG to harvest natural forests responsibly and sustainably and supports the Government policy of 100 per cent downstream processing,’ thenChairman of Cloudy Bay Rob de Fégely told Made in PNG in mid-2013. Since 2006, the company has been developing a Forest Management Area in the Cloudy Bay region, 250 kilometres south-east of Port Moresby. It was awarded the country’s first 100%-downstream processing license by the PNG Forest Authority (PNGFA), covering 148,900 hectares. Its market is primarily domestic, with the construction industry a major customer.

cubic metres of logs per year from an earlier figure of 60,000 cubic meters per year. The peak industry body, the Papua New Guinea Forest Industries Association, estimates that 50-60% of processed timber exports—which go mostly to Australia, New Zealand and the Pacific—are produced by companies that have adopted FSC, the Programme for the Endorsement of Forest Certification regulatory and traceability standards or the (Swiss company) SGS system for certification.

‘This certification proves that it is possible in PNG to harvest natural forests responsibly and sustainably’

Cut in yield De Fégely said that the FSC auditors had accepted Cloudy Bay’s reduced assessment of sustainable yield, which it has cut to 48,000 36

Not a cheap system

De Fégely, now President of the Institute of Foresters of Australia and an industry consultant, said that plans to add value to 100% of the harvest in Papua New Guinea and to implement sustainable practices would take time, money and training. ‘The world needs to understand that sustainable forest management is not a cheap system but it is a renewable and sustainable one and therefore the wood and other forest values need to be priced accordingly,’ he told Made in PNG.

P RODU C ER P RO F I L ES

Producer profiles The AkzoNobel Group

K K Kingston Limited

Lae Biscuit Company

‘Coating is our Passion.’ The AkzoNobel Group is the world’s leading paint company. AkzoNobel, in PNG, is colloquially known as Taubmans, a brand name we’ve been trading under for the past 45 years. AkzoNobel is a full-service paint company with all the technical expertise and local know-how to support any coating needs. Other well-known brand names under the AkzoNobel umbrella in PNG are International (M&PC) and Lesonal (automotive). AkzoNobel services its valued customers in PNG through an extensive distribution network, with branches spread throughout the country (Port Moresby, Lae, Mt Hagen and Kokopo). We also have partnerships with many resellers throughout the nation. At the beginning of 2013, the company rolled out its new ‘Let’s Colour’ logo for the Taubmans decorative paint range. The idea behind the new look was to demonstrate to stakeholders and customers the continued growth and development of our company and staff expertise. Our ambition is to continuously deliver the highest quality products and services with a deep commitment and emphasis towards sustainability and eco-friendliness. The AkzoNobel Group takes great pride in being no 1 on the Dow Jones sustainability index list and in PNG it is the first industrial company that is exporting its waste to Australia for recycling. In Port Moresby, we are proud to be associated with the sculptures erected by NCDC throughout the nation’s capital as part of its beautification program. This is just one of the many ways where we bring colour to the country and reinforce our tagline of ‘Let’s Colour’.

K K Kingston is one of PNG’s leading manufacturers. Our products range from plastic products to industrial chemicals, paper products, cooking oil and household consumer goods. The company was founded in Lae in 1972 by Keith Kingston and his wife, Judy. From humble origins, K K Kingston has grown to become one of the largest manufacturing companies in Papua New Guinea. Today the company employees over 700 staff, 98% of whom are Papua New Guinean. We continue to develop and grow our business in PNG, consistently upgrading our production and raising our standards. K K Kingston is structured into four main divisional business units: Industrial, Commercial, Retail and Hire. Through these divisions we market, distribute and sell our products throughout Papua New Guinea, and export to Australia and the Pacific. K K Kingston is also the manufacturer of the renowned Tuffa brand of water tanks and rotomould products. Tuffa tanks are proud to be the tank of choice for many water projects throughout PNG.

Lae Biscuit Company, established since 1972, is one of the pioneer biscuit manufacturers in Papua New Guinea and is responsible for some of the country’s best-known biscuits, including: SNAX brand of beef and chicken flavoured biscuits, CABIN biscuit, BEEF NAVY biscuit and the WHEATMEAL brand. The most popular—Snax biscuits— are made with authentic flavour to meet both local tastes and international standards. Lae Biscuit Company has produced a variety of products that have attained Gold Status in Papua New Guinea; its biscuits are also exported to several Pacific countries like Solomon Islands and Vanuatu. In 2009, Lae Biscuit Company relocated from the centre of Lae to a state-of-the-art new factory in Kamkumung area in the city’s outskirts, creating much-needed local employment. This facility doubled the workforce in Lae to about 450 people and provides some of the best wages and conditions for manufacturing workers in PNG. A second manufacturing facility in Port Moresby employs another 250 staff. Lae Biscuit is well regarded as a good corporate citizen. It assists and sponsors many local groups and sporting associations, with the most well known being the LAE SNAX TIGERS rugby league team.

www.kingston.com.pg

www.laebiscuit.com.pg

www.taubmanspng.com

P RODU C ER P RO F I L ES

Mainland Holdings Limited

PNG Forest Products

PNG Taiheiyo Cement

Tablebirds fresh and frozen poultry, Get Cracking eggs, Three Roses flour, Tablebirds stockfeed and Mainland crocodile products are famous brands of parent company Mainland Holdings Limited, the south-west Pacific’s largest diversified agribusiness, headquartered at Lae, Papua New Guinea. A vertically integrated company, it operates a feed mill producing stockfeed to complement the supply of day-old chicken broiler, breeder and egg farms. Day-old chicks are also grown-on in the care of our family of smallholder outgrowers and other customers. Our flour mill fills the shelves of supermarkets and stores nationwide with popular Three Roses flour, presented alongside our fresh and frozen chicken packs and fresh eggs, all products regarded as the highest quality available to discerning PNG customers, and an increasing export market. Our crocodile farm is near Lae, Papua New Guinea’s main port city, breeding and growing saltwater crocodiles, for their skins and meat. Natural resource owners in Papua New Guinea’s vast tropical wetlands harvest eggs and young crocodiles from the wild, preserving genetic diversity. We farm in accordance with the Convention on the International Trade of Endangered Species (CITES) and our focus on environmental values and sustainability adds to the value and demand for our products at the top end of the global market. Across Papua New Guinea, the company employs more than 2000 trained and motivated men and women.

PNG Forest Products (PNGFP) has developed into an industry leader and an invaluable player in the building of a better Papua New Guinea. The company has evolved from its beginnings in alluvial gold dredging in the 1930s to a fully integrated timber and plywood processing establishment employing over 1250 staff and supplying both the domestic and export markets with plywood, kit set buildings and sawn timber products. We offer a complete range of complementary plantation pine timber and plywood products, including the highly sought after marine and furniture grade plywood, concrete formply, general structural grade plywood, wall and ceiling linings, sawn timber products and round poles. As part of our product range we also manufacture ACQ-treated and CCA pressure-treated pine products at our certified international standard production plant. PNGFP has the ability and capacity to produce plywood and sawn timber in impressive volumes to suit the requirements of any client, and project solution capability to meet the prefabricated building needs of the mining, exploration, infrastructure, primary industry, tourism, community and residential housing sectors throughout PNG, the South Pacific and beyond. We are also extremely proud of our commitment to utilising renewable plantation pine, restocked from an extensive nursery and regrowth program in our home base of Bulolo. Offering experience you can rely on, the production capacity your project demands, and the seamless supply you need. PNGFP specialises in the design, architecture, engineering and manufacture of prefabricated buildings.

PNG’s only cement producer, PNG Taiheiyo Cement, is based in Lae and operates a modern plant—the first of its kind in the South Pacific. It produces Type 1 Portland cement, under the Paradise brand. All raw materials such as clinker are imported from its Japanese parent company, Taiheiyo Cement Corporation (TCC). It then processes (grinds), packs and distributes cement to domestic and export customers. TCC bought out PNG Taiheiyo Cement upon privatisation in 2000. It has a production capacity of 200,000 tonnes and its operations include its own storage silo and wharf, and can cater for vessels of 10,000 to 15,000 tonnes dead weight. PNG Taiheiyo also exports to the Solomon Islands, Vanuatu and Micronesia, as well as importing cement under the ‘Premium’ brand from Nghi Son Cement in Vietnam, a company that has belonged to the TCC Group since the beginning of 2013. ‘PNG’s consumption of cement is still low compared to other countries,’ says Managing Director Takashi Watanabe. ‘But demand is steadily increasing due to real estate and major infrastructure projects.’

www.tablebirds.com.pg

www.pngfp.com

www.pngtaiheiyo.com.pg

P RODU C ER P RO F I L ES

R D Tuna Canners Limited

S P Brewery

Trukai Industries Limited

Based in Madang, R D Tuna Canners is Papua New Guinea’s largest tuna canner. It sells its products under the Diana and Dolly brands, supplying both PNG and the Pacific Islands, and also exporting to Europe, the United States and Asia. The company has integrated fishing and cannery operations, with 18 licensed fishing vessels operating in PNG waters and around 3500 employees. Its facility can process up to 200 metric tonnes per day of tuna raw materials to produce canned tuna and frozen cooked tuna loins for its customers worldwide. The cannery complex is composed of the cannery itself, power plant, steam plant, waste water treatment plant, microbiology and chemistry laboratories, two big warehouses housing the labelling lines as well as a separate can-making facility and a printing press to print and process labels for the canned tuna products.

South Pacific Brewery Limited is the leading alcoholic beverage company in Papua New Guinea. Established in 1952, SPB’s portfolio of internationally recognised beers, South Pacific Lager, South Pacific Export Lager and Niugini Ice Beer, has won several international awards for product quality around the world. S P Brewery has a strong partnership with sports and other community based activities. Its flagship brand, South Pacific Lager, is a strong supporter of rugby league and is proud to have signed up to sponsor PNG’s first team in the Queensland Intrust Super Cup. Its premium brand South Pacific Export Lager backs PNG’s richest golf event, the PNG Open, as well as assisting Rugby Sevens. 2014 marks the 22nd year of the prestigious SP Sports Awards, recognising sporting excellence around the nation. SP Brewery also values the importance of PNG traditions and cultures and the need to preserve them for future generations through its sponsorships with Goroka, Enga, Mt Hagen and Hiri Moale Shows. Since S P Brewery started exporting to Australia in 2008, its efforts are beginning to show rewards in a market that is very competitive. South Pacific Lager is also now available in Fiji.

‘We are more than just rice.’ Trukai is the leading supplier of rice in PNG and is proud to be the only rice business that manufactures its products locally. Trukai is also committed to increasing local rice production to feed our people and over the past 40 years the company has created sustained economic growth for the country. Trukai employs 900 people in PNG and supports thousands more through family networks and the rice industry supply chain. Trukai is proudly 33 per cent owned by the people of PNG through the Pacific Balanced Fund and its 40,000 local shareholders. Annually, the company contributes over K180 million to the PNG economy and it’s far reaching corporate responsibility program has contributed in excess of K30 million over the past 10 years to ongoing health, education and sporting programs. Additional health benefits for the people of PNG are gained from Trukai’s rice range, as it is the only rice manufactured in PNG to be vitamin enriched and fully comply with government regulations. Trukai is committed to helping build an independent, successful and inclusive rice industry for the benefit of PNG. We are currently undertaking a number of activities focused on increasing rice production in PNG, including seed variety testing, industry training and support, seed distribution, and marketing of finished product. These projects have also been undertaken in conjunction with numerous independent PNG organisations. As PNG’s leading supplier of rice, Trukai is committed to increasing local rice production to feed our people, enhancing agricultural production, improving PNG’s food security and increasing standards of living for our people.

www.rdtunacanners.rdgroup.com.ph

www.sp.com.pg

www.trukai.com.pg

EAST SEPIK Fisheries, forestry, vanilla, cocoa

F EATURE INDONESIA

M OM A S E

Papua New Guinea’s manufacturing and agricultural hubs

Fish processing, sugar, nickel, cobalt

ENGA

Madang

WESTERN Gold, silver HIGHLANDS Coffee, tea JIWAKA HELA

Mount Hagen

Coffee, tea

Oil/gas

HIGHL ANDS

CHIMBU (SIMBU) Coffee

SOUTHERN HIGHLANDS Oil/gas

WESTERN PROVINCE

Goroka

EASTERN HIGHLANDS Coffee

GULF

Copper/gold, forestry, aquaculture

Oil/gas, marine products

SOU T HERN

We profile two regional cities—Lae and Mount Hagen—which have been designated by government as the hubs for the country’s processing and agricultural sectors, respectively. Lae

Although it plays second fiddle to the national capital, Port Moresby, Lae is PNG’s industrial hub, with considerable activity in the sectors of manufacturing, trading, agribusiness and, more recently, fisheries. Many of PNG largest producers have their head offices here, including K K Kingston, Laga Industries, Mainland Holdings and (100 km away) Ramu Agri-Industries, as well as the local subsidiaries of international firms such as Nestlé SA, Coca-Cola Amatil, DuluxGroup and PNG Taiheiyo Cement.

Torres Strait

Local growth Unsurprisingly, PNG’s recent resources boom, spearheaded by the ExxonMobil-led PNG LNG project, has had a considerable impact on Lae. The city has not only sent thousands of tonnes of goods and equipment up the Highlands Highway to PNG’s gas fields, but is also 90km from the Hidden Valley gold mine and 65km from the Wafi-Golpu project, a gold, silver and copper project of significant potential. A major local fisheries sector has sprung up over the past decade with major processing facilities constructed by Frabelle (Philippines), International Food Corporation (Malaysia) and Majestic Foods (Thailand, see page 16). The good times have also encouraged PNG’s larger manufacturers to make sizable new investments in Lae, including S P Brewery, K K Kingston and Lae Biscuit Company. With its central location, access to the Highlands Highway, and port facilities, it is a natural industrial hub. Nowadays, between 60% and 70% of all PNG’s trade passes through Lae, including 90% of coffee exports.

Infrastructure challenges Despite this it is still beset by the kind of infrastructure challenges that are endemic in PNG. Its poorly-maintained urban roads have AUSTR earned it the nickname ‘pothole city’ while congestion at PNG’s busiest port leads to perennial freight delays. It also shares the same security problems as Port Moresby, with its accessibility making it an obvious destination for itinerants from the Highlands. There is some good news on the infrastructure front, however. Steady improvements are being made to the city’s roads, and a new highway to Nadzab Airport is under construction. Badly needed investment is occurring in power generation, whilst internet connectivity has been greatly improved as a result of Lae connecting 40

Bisma

MADANG

Lae

MOROBE

Manufacturing, logistics, coffee, livestock, fish processing, forestry, gold, copper

CENTRAL

Gulf of Papua

Fisheries, forestry, gold, rubber

to the fibre-optic network which connects PNG to the worldwide Daru web via Madang. The biggest infrastructure project of all, the expansion of Lae’s port, is expected to be completed by the end of 2014.

Lae facts

Port Moresby

NATIONAL CAPITAL DISTRICT Manufacturing, logistics

• Official urban population of just 120,000 (2000 census) • Situated on the Huon Gulf and is the capital of Morobe Province • Lae’s Nadzab Airport is a 30-to-40 minute drive from town • PNG’s largest port facilities • PNG’s major road hub, located at the start of the Highlands Highway • Regular flights to Port Moresby and other domestic centres

Mount Hagen Mount Hagen is Papua New Guinea’s third-largest city, with a population of 46,250. It is the capital of Western Highlands Province. The Highlands Highway is the main arterial route to connect Mount Hagen with the coastal cities of Lae and Madang. Centrally positioned in the country’s fertile Highlands agricultural region, the city is a natural centre for agriculture. Indeed, Prime Minister Peter O’Neill announced plans in August 2013 to develop Mount Hagen as the country’s agricultural hub. The Mount Hagen Cultural Show, one of the largest cultural events in PNG, is held each August. It is one of the biggest tourist attractions of the country.

Mount Hagen facts A L• IPopulation A 46,256 (2013) • Founded in 1934 • 1677 metres above sea level • Produce include minerals, coffee and other agricultural crops that grow at altitude, such as sweet potatoes and potatoes • Services include a hospital, teachers’ training college and international school

Kokopo

M a d e i n P N G D i r e ct o ry

rck Sea

EAST NEW BRITAIN Credit: Manufacturers Council of PNG

Cocoa, copra, forestry, gold, organic spices

Kimbe

N E W

WEST NEW BRITAIN Palm oil, forestry

GU INEA

ISL ANDS BOUGAINVILLE (AUTONOMOUS REGION) Copper, cocoa, copra

Solomon Sea

NORTHERN ORO PROVINCE) Palm oil, coffee, cocoa, copra

Coral Sea

Made in PNG Directory Alotau

MILNE BAY

Copra, coffee, cocoa, spices, marine products, gold, forestry, oil palm

USEFUL CONTACTS Government Department of Agriculture and Livestock www.agriculture.org.pg Investment Promotion Authority of PNG Tel +675 308 4444 www.ipa.gov.pg Department of Commerce and Industry Tel +675 327 7350

Lae Chamber of Commerce and Industry Tel +675 472 2340 lcci@global.net.pg Manufacturers Council of PNG Tel +675 321 7143 info@pngmade.com PNG Chamber of Commerce Tel +675 320 1988 pngcci@global.net.pg

National Agriculture Quarantine & Inspection Authority Tel +675 3112 100 naqia@dg.com.pg

Port Moresby Chamber of Commerce & Industry Tel +675 321 3077 bizcentre@pomcci.org.pg www.pomcci.com

National Fisheries Authority Tel +675 3090 444 www.fisheries.gov.pg

PNG Forest Industries Association +675 325 9277 www.fiapng.com

Papua New Guinea Custom Services Tel +67 5 3226 983 www.customs.gov.pg Papua New Guinea Forest Authority Tel +675 3277 800 www.forestry.gov.pg

Industry Business Council of PNG +675 320 0700 executive@bcpng.org.pg www.bcpng.org.pg

INFORMATION RESOURCES

The National PNG’s national daily newspaper, which also publishes the annual Papua New Guinea Yearbook (ISSN 1726-121X), a useful reference. www.thenational.com.pg The Post Courier PNG national daily newspaper www.postcourier.com.pg Investment Promotion Authority of PNG Starting point for businesses looking to set up in PNG, this agency now also provides online business registration and allows company searches. www.ipa.gov.pg PNG White Pages PNG’s online telephone directory includes business and government phone numbers. www.whitepages.com.pg

Business Advantage PNG PNG’s online business and investment magazine www.businessadvantagepng.com The PNG Investors’ Manual A handbook for investing and doing business in Papua New Guinea. www.pomcci.com

M a d e i n P N G D i r e ct o ry

Manufacturers Council of Papua New Guinea members Members can be contacted through the Council on email info@pngmade.com.

21C Limited Akzo Nobel (PNG) Ltd Amalgamated Knitwear Industry Ltd Amalpack Ltd Awute Coffee Producers Belltek Chemicals Ltd BMF Organic Products Ltd British American Tobacco (PNG) Ltd City Pharmacy Ltd Cloudy Bay Sustainable Forestry Ltd Coca-Cola Amatil (PNG) Ltd Colgate Palmolive (PNG) Ltd Colorpak Ltd Damba Ltd t/a Prima Smallgoods DuluxGroup (PNG) Pte Ltd Ela International Ltd Frabelle (PNG) Ltd Globe Manufacturing Ltd Goodman Fielder International (PNG) Ltd Goroka Coffee Roaster Ltd House of Gemini Jewellery Hugo Canning Ltd ICBM Corporation Imprint Copy Centre Ltd International Food Corporation Ltd ICBM Corporation

InterOil Refinery JKT Lim Ltd K K Kingston Ltd Kokoda Tailoring Ltd Kongo Coffee Ltd Koyasi Printing Ltd L & C Pacific Enterprise Ltd Lae Biscuits Co. Ltd Lae Builders & Contractors Ltd Laga Industries Ltd M & S Tsang Ltd Mainland Holdings Ltd Markham Culverts Ltd Melanesian Spice Ltd Moore Business Systems (PNG) Ltd NCI Packaging (PNG) Ltd Nestlé (PNG) Ltd Niugini Steel Corporation P C (PNG) Ltd Pacific Foam Ltd Pacific Industries Ltd Panamex Pacific (PNG) Ltd Paradise Food Ltd Paradise Organic Spice Ltd Pelgen’s German Smallgoods Ltd Pipemakers Ltd

PNG Brothers Grocery PNG Forest Products PNG Organic Farm Product Ltd PNG Salt Industries Ltd PNG Taiheiyo Cement Ltd R & P Signs Ltd R D Tuna Canners Ltd Ramu-Agri Industries Ltd Rimbunan Hijau Timber Processing Ltd Roots Organic Products Incorporated S P Brewery Ltd Senpack Ltd Starland Ltd Steel Industries Ltd Super Value Stores Ltd Threadneedle Ltd Treid Pacific (PNG) Ltd Trukai Industries Ltd Vitis Industries Ltd Warrior Tanks Ltd W R Carpenter & Company Estates Wimble & Co. Ltd Wong Tim & Co. Ltd Woo Textile Corporation Ltd Listing correct as of January 2014