The Australia–Papua New Guinea Business Council is holding its 36th business forum and trade expo this week in Brisbane. Business Advantage PNG reports from the event, which is both a physical and online event this year.

The 36th APNGBC forum, postponed from 2020, is a hybrid event this year.  Credit: BAI

With delegates from Papua New Guinea prevented from attending the forum due to travel restrictions between the two countries, many speakers and delegates have been participating online in this year’s forum.

Unprecedented times

The event is taking place against a backdrop of unprecedented and difficult business conditions due to the COVID-19 pandemic.

As APNGBC President Mark Baker told delegates, ‘doing business is as challenging as it ever has been’.

He said there was unlikely to be significant change in business conditions this year and they were likely to continue into 2022, given the expected progress in vaccination programs, which delegates were briefed on.

Notwithstanding the challenges, BSP Financial Group’s Head of Strategy & Investor Relations Paul Lee-Bernstein told the forum that the bank was ‘cautiously optimistic’ about PNG’s economic recovery. He observed that foreign exchange (FX) orders were currently taking between two and six weeks in PNG but said FX situation should ‘hopefully improve’ by the end of the year.’

Patchy

By way of contrast, ANZ’s Pacific Economist Kishti Sen said PNG was set for another 12 months of economic weakness, pointing to ‘patchy growth figures symptomatic of a soft economy’. While the global economy is expected to grow by six per cent this year, Sen expressed doubts about PNG’s ability to benefit from this higher global demand.

‘Do you have the additional capacity to respond to that demand? I don’t think so,’ he told the forum.

While he welcomed the PNG’s government ‘expansionary’ budget, he said it was not enough to sustain positive growth and he was expecting GDP to ‘track sideways’ in 2021.

Resources

Nevertheless, Sen said the medium-to-longer term outlook was positive for PNG, which could be ‘the powerhouse economy of the Pacific’ in the second half of this decade, thanks to construction activity stimulated by new resources projects such as Papua LNG, P’nyang and especially Wafi-Golpu.

Australia’s Consul-General in Lae, Mark Foxe, agreed that Wafi-Golpu would be transformational for its host province, Morobe, but observed that the province was not waiting for the copper–gold project but was ‘growing anyway’.

He also asserted that, rather than minerals, the country’s biggest untapped resource was actually its human capital: ‘there’s a huge youth bulge [in the population] waiting to be utilised’.

FDI challenge

Clarence Hoot, Managing Director of PNG’s Investment Promotion Authority (IPA), gave a clear illustration of PNG’s short-term economic challenge by revealing a dramatic fall in the number of foreign investment lodgements so far this year, which were less than half pre-COVID levels. Globally, foreign direct investment (FDI) had fallen by 45–50 per cent in the past year, he said, and PNG was similarly affected.

In response, Hoot said the IPA was planning to ramp up its investment promotion activity with the support of multilateral agencies such as the Asian Development Bank, with a focus on attracting more FDI, especially in ‘agricultural and sustainable industries’.

Infrastructure

One company showing early interest in green projects in PNG is Australia’s Fortescue Future Industries (FFI), which signed a deed of agreement with PNG’s government in September 2020 to consider hydropower projects. Andy Hetra, FFI’s PNG Country Manager, told the forum the company hoped to announce a similar agreement regarding geothermal power soon.

William Samb, PNG’s Minister for Transport and Infrastructure, participated in the forum online.

In the nearer term, the forum heard of joint Australia–PNG plans to expand defence facilities on Manus Island, with construction activity expected to commence in late 2021.

PNG’s Minister for Transport and Infrastructure William Samb also provided an overview of the Connect PNG program, the ongoing project to develop PNG’s transport infrastructure.

While its priorities were clear, the program was currently hampered by ‘a lack of consistent financing’ and a relative lack of funding for maritime and air infrastructure, he said. He noted public-private partnerships would be pursued for larger projects.

One of the entities seeking to fund infrastructure development in PNG is the AUD$2 billion (K5.44 billion) Australian Infrastructure Investment Fund for the Pacific (AIFFP). Its head, Benedict David, told the forum that the fund was changing its approach in response to a ‘shift in demand’ for infrastructure finance.

The AIFFP had observed, he said, a new focus on financing infrastructure projects that ‘promoted greater economic activity quickly,’ funding for programs rather than single projects, refinancing of existing projects, equity financing and a demand for local currency lending.

‘Our suite of tools has been expanded in respond to that demand,’ he said.

The forum continues today.