Government funds to cover debris removal and business recovery have this week started to flow to businesses affected by the January 10 riots in Port Moresby. With funds for actual rebuilding still to be finalised, Nadav Shemer Shlezinger talks to business leaders about the longer term consequences of the riots.

Damage caused to Bismillah Group shops in Gerehu on January 10. Credit: via POMCCI

Six months on from the January 10 Port Moresby riots, Papua New Guinea’s government has begun releasing around K255 million in payments earmarked for debris removal and business recovery.

The Office of the Chief Secretary presented cheques reportedly totalling more than K17.5 million to eight businesses on 1 July, although a portion of this figure was also for wage support.

Ian Tarutia, President of the Papua New Guinea Chamber of Commerce and Industry (PNGCCI), confirmed to Business Advantage PNG that more payments are expected to be processed this week.

“Everyone’s insurance premiums are going to go up, if they can even get cover now in-country.”

These payments mark the beginning of the second of three phases of financial support promised by the government in the aftermath of January 10. In the first phase, the government paid around K15 million to dozens of businesses to cover six months of wages for employees laid off as a result of the riots.

Meanwhile, local media are reporting that a commission of inquiry into the Royal Papua New Guinea Constabulary over the January 10 unrest will commence on 15 July.

Next phase: rebuilding

Attention in the business community now turns to the third phase, earmarked for the rebuilding of destroyed or damaged property. However, questions remain as to the timing and the form this will take.

The total value for all claims submitted in the third phase will reach around K400 million, according to Rio Fiocco, President of the Port Moresby Chamber of Commerce and Industry.

This includes claims by Bismillah Holdings for its damaged Gerehu stores, Brian Bell Group for its Gerehu distribution centre, and various other businesses.

“The riot, strike and civil commotion clause in our insurance policy provides for a maximum payout of K5 million – and we have one of the largest riot, strike and civil commotion insurance policy sub-limits in PNG”

Fiocco tells Business Advantage PNG the government was looking at providing concessional loans to business, rather than grants, for phase three.

“The finer details as to who is going to lend the money and on what concessional terms – that will have to be finalised.”

Ian Clough, Chairman of Brian Bell Group, tells Business Advantage PNG that the government had also proposed GST credits for imported building materials, a move which would be worth “millions of kina” to his business. But he says there is “still no clarity” on how this would work.

Legal action for damages against the government – should sufficient assistance not be forthcoming – has also been canvassed within the business community, according to Fiocco, who suggests this would have “a very good chance” of succeeding.

Long-term impact

POMCCI’s Rio Fiocco

Fiocco says the riots had left “a big psychological impact” on business owners and staff, and noted that many employees of affected businesses had been reluctant to return to work. The scenes from January 10 went “all around the world,” he observes, suggesting that this could lead foreign investors to perceive PNG as a high-risk environment.

But he warns that the biggest impact on business overall could be from higher insurance costs.

“Everyone’s insurance premiums are going to go up, if they can even get cover now in-country. And it may be that some of the biggest businesses will have to go [offshore] to the Lloyd’s market now to get cover for that sort of thing.”

Clough agrees that insurance will be “problematic” going forward. But he stresses that this has always been a challenge for PNG businesses, even before January 10.

“We had a loss of K120 million on the day, not including any business interruption or anything else like that. Our back-of-the-napkin assessment is that it was probably closer to K180 million,” he says.

“The riot, strike and civil commotion clause in our insurance policy provides for a maximum payout of K5 million – and we have one of the largest riot, strike and civil commotion insurance policy sub-limits in PNG,” he says.

Future proofing

Clough also acknowledges that the January 10 riots changed Brian Bell Group’s planning “significantly, at least in the near term.”

“We had a capital program for 2024, 2025 and 2026 in play. This [the unrest] has just meant there’s been a diversion of that capital into the rebuilding exercise, and that a number of projects that were planned for the near term have been deferred.”

A key project was the building of a second warehouse in Lae, and Clough confirms this is now “powering along in earnest.” He says the disruption has increased the importance of bringing it online.

“It means we’re future-proofing our business a little more because, if this event were to take place again, we only lose one site, not all our sites.”

POMCCI’s Rio Fiocco will be a participant in the 2024 Business Advantage Papua New Guinea Investment Conference, taking place in Brisbane on 12 and 13 August. To view the program and register, click here.