A view over Port Moresby’s Waigani district. Credit: BAI

At the end of 2019, Austrade commissioned Tebbutt Research to learn from Australian companies who work with the Pacific how to minimise risk.

The research provided some excellent findings on how to address risk through strong networks and embracing diversity. Here are their insights.

Networks and knowledge

A network of contacts in-country was viewed as fundamental to develop a successful presence. Those organisations with partners or working as a sub-contractor had significant advantages over businesses establishing a market presence for the first time.

Organisations with in-country alliances valued the support of established networks on the ground, which provided the knowledge of local regulations, labour laws, payment systems and assistance in setting up bank accounts.

‘A major mistake by foreign companies is the failure to listen to the needs of the Pacific customer and wanting to push their solution.’

Organisations working in Fiji for the first time spoke about the need to quickly build in-country relationships using ‘old school’ methods such as using telephone directories and cold calling in store.

In Papua New Guinea, it was evident the pathway was much more difficult. The main approach was to rely on formal networks such as business councils, the Australian High Commission, Austrade and industry conferences to establish relationships and build local knowledge.

Cultural diversity

Senior Trade Commissioner Papua New Guinea and the Solomon Islands, Andrew Weeks.

The Pacific is a region comprising a diverse range of countries, with different business cultures, beliefs and faiths.

The Pacific experts suggested that new entrants to the region shouldn’t underestimate the cultural diversity of the countries. It is imperative that you ‘do your research’ and be well informed before pursing business opportunities in the region.

Businesses and key informants indicated that, when operating in the Pacific, you have to approach the market with an open mind. Respondents spoke about the need to treat individuals with respect.

A major mistake by foreign companies is the failure to listen to the needs of the Pacific customer and wanting to push their solution. It is important to partner with organisations to understand local needs. Take the feedback from your customers and look to co-design a solution that works locally.

‘The Pacific works on the philosophy of “relationship first and business second”‘

Adapt your solution to the local supply chains, the customer and, more importantly, the local culture. Be patient.

Relationship first

The Pacific works on the philosophy of ‘relationship first and business second’. It is important to spend time forming relationships and respecting local traditions.

This takes time, which is something that Western business cultures, such the Australian, are unfamiliar with.

As Australians, we have a strong cultural desire to be transactional, get the job done and move to the next project.

Taking time to appreciate the diversity of the Pacific workforce, their knowledge and family situation is a skill to be mastered.

It was strongly suggested that the Pacific is all about friendships. In addition networking, knowing the right people, trying to understand your customers requirements and delivering products customised to their needs.

Understanding risk

Understanding the risk profile of customers and opportunities, whether in government or private sector, was viewed as a fundamental aspect of operating in the Pacific region.

This factor was heightened for those businesses operating in PNG. Payment risk was viewed as a significant risk factor when offering credit terms. Payments are slow, with businesses expected to offer standard credit terms of 60 days or more.

‘To operate successfully in the Pacific region, it is critical to gain a level of acceptance from local communities and government authorities. This is not negotiable.’

This risk has increased since the start of the COVID-19 pandemic because of reduced economic activity. Seeking financial advice is critical.

The foreign exchange (FX) restrictions in PNG are a significant issue for Australian companies. The excess demand for foreign currency leads to substantial delays in the processing time of FX orders.

The difficulties experienced in transferring monies from countries across the Pacific region back into Australia was an issue that resonated with all businesses interviewed.

Social licence

It was felt that, to operate successfully in the Pacific region, it is critical to gain a level of acceptance from local communities and government authorities. This is not negotiable.

Larger organisations spoke about investing in community programs. Demonstrating that you are not just a foreign investor seeking quick returns, but that you have an interest in making a real difference to the lives of the local people.

Investing in a social license and engaging with the community sends clear messages that you’re a legitimate operator that will be not open to unethical business practices.

Businesses spoke about the importance of mentoring, training and employing local people.

It is important that foreign operators deliver initiatives that will not only have economic but also positive social outcomes.

Austrade assistance

Austrade can help you to succeed by providing practical on-the-ground advice and market insights about doing business in the Pacific to meet your business needs. Together with our partners, we are here to assist Australian companies in the Pacific.

Adrian Weeks is Senior Trade & Investment Commissioner for Papua New Guinea and the Solomon Islands at the Australian Trade and Investment Commission (Austrade).