Malaysia’s diversified Rimbunan Hijab Group is a major investor in Papua New Guinea. Managing Director James Lau talks to Business Advantage PNG about the company’s current construction projects, how its retail, agribusiness and forestry subsidiaries are performing, and the economic outlook for 2016.

The soon-to-be completed Stanley Hotel, Port Moresby

Business Advantage PNG (BAPNG): When do you expect the Stanley Hotel in Waigani to be fully operational? Do you have other construction projects in the pipeline?

James Lau (JL): The hotel should be fully operational by mid-2016. Other construction projects are: the fuel and service station at Eight-Mile, currently under construction; a retail and commercial centre at Eight-Mile, currently in the planning phase; and the Group’s second Vision City project in Lae is currently in the conceptual planning stage.

BAPNG: The forestry sector bounced back in 2014. How has 2015 been for R H’s forestry operations? Bank of PNG statistics suggest that processed/value-added exports are still a very small portion of PNG’s forestry exports. Realistically, what prospects do you think there are for greater value-adding in the sector?

JL: Rimbunan Hijau is the market leader in forestry and timber processing. However, the forestry sector faced a lot of difficulties in 2015. Round log export prices declined because of oversupply and poor market conditions especially in China—PNG’s main market.

Despite these difficulties, we have maintained operations and employee numbers in this sector, but we foresee tough conditions to continue at least into the second half of 2016. Timber processing has continued normally and we hope to expand this sector in the future.

BAPNG: R H has made significant agribusiness investments in PNG in recent years. How are these progressing and what are the prospects for further expansion?

RH Group’s James Lau

JL: The agribusiness is performing well, with about 10,000 hectares of palm trees planted to date. The first palm oil processing facility, with a capacity of 60 tonnes of fresh fruit bunches (FFB) per hour is under construction.

The RH Group continues to see PNG as an attractive investment destination and we increased our business activities throughout the year.

We anticipate construction to be completed by mid-2016 and we plan to build two more processing facilities with the same capacity by the end of 2018. By then 30,000 hectares of oil palms should be planted.

BAPNG: How has RH’s retail division performed in 2015?

JL: Our retail sector has performed well, with single-digit growth in turnover and employee numbers in 2015. We see the reasons for outperforming in strong marketing efforts and expanding retail spaces.

BAPNG: Many economists are anticipating a downturn in 2016 in PNG. What do you see as the prospects for your own business and for PNG’s economy more generally over the next 12 to 18 months? Is RH planning further major investments in PNG?

JL: 2015 has seen reduced economic growth in the region, mainly caused by slow global growth, and declining energy and commodity demand and prices. PNG had to face up to these challenges too.

The RH Group continues to see PNG as an attractive investment destination and we increased our business activities throughout the year.

In 2016, we will focus on our existing projects and the planning phases of projects already in the pipeline. We expect some marginal growth in non-forestry sectors to continue for the next 12 to 18 months and hope for gradual improvements afterwards.

It is difficult to predict developments in the forestry sector because of many external factors (i.e. export market conditions) that are beyond our control.