The International Finance Corporation is undertaking a scoping study of the Markham and Ramu valleys to assess agricultural opportunities in Papua New Guinea. The results will help to develop a win-win business model for investors and customary landowners.

The fertile Markham Valley near Lae is one of PNG’s most productive agricultural regions.

About 300,000 to 400,000 hectares of land in the Markham and Ramu valleys could be used for agricultural development, Christian Reichel, International Finance Corporation’s (IFC) Operations Officer in Port Moresby tells Business Advantage PNG.

Although there are challenges, both valleys have potential for growth, he explains.

‘If you are an investor and fly over the valleys, they look beautiful. When I was flying over them, I thought: “I would love to do something here”. Then, when you land, you wonder: “Why isn’t there more activity?”

‘Remote sensing [scanning land by satellite or aircraft] is becoming more and more advanced. With this technology, you can analyse if an area is suitable for cassava or sorghum, for instance.’

‘It’s clear when you talk to the people that there are challenges, the biggest of which seems to be land ownership. But there are other issues, such as infrastructure and farmers gaining access to inputs.

‘When you consider the growth in population in PNG and the demand growth in Asia, it’s clear we need to understand how we can support farmers, manufacturers and exporters to seize these opportunities.’

Mapping

The first step towards developing a business model for agriculture will be to map the area.

To map the region, the IFC is looking to partner with research and consulting firm Abt Associates and the new program Grow PNG with further support from the Australian and New Zealand governments.

As part of the study, the IFC and its partners will look at land ownership, soil types, crop suitability, access to necessary resources as well as historical, current, and planned economic activities.

‘Remote sensing [scanning land by satellite or aircraft] is becoming more and more advanced. With this technology, you can analyse if an area is suitable for cassava or sorghum, for instance.

‘Potential investors have access to relevant information in one stop, so they can decide if it’s worth spending more time in developing business and investment plans.’

Farm management

IFC’s Christian Reichel. Credit: Peter Rae

That is why one element of the IFC’s program is to create a farm management service company. Its aim would be to offer advice on good agricultural practices, farm management and farm inputs (fertilisers, chemicals, and equipment, especially tractors).

‘The landowners may have 5000 hectares and are asked to supply, say, 5000 tonnes of sorghum. They might say: “Yes we could do this, but we don’t have the technical skills and capacities”.’

The service company would help farmers develop the technical skills to improve their agricultural practices by advising and farm management services. The service company could also do ‘everything for landowners, in return for a profit share,’ explains Reichel.

He believes that if there are different business models available to landowners, then farmers will not have the feeling they are losing the land.

Turn over

Reichel says that land ‘meaningfully divided between crops’ and crops that are regularly turned over would help the landowners decide what to produce. Long-term crops, however, could mean landowners lose ‘some feeling for it’.

‘We would like to avoid a situation where investments don’t work out and companies leave the country out of frustration.’

‘[If] they control it that feels much more comfortable for the landowners. The model works because they maintain supervision. For international companies, buying or leasing land is very difficult because of social risks.

‘We would like to avoid a situation where investments don’t work out and companies leave the country out of frustration.  A partnership with professional landowners and investors makes much more sense and will lower the risk on both sides.’

Reichel says the intention is to create a model that can be applied to the whole of PNG.

‘Let’s focus on showcasing one pilot area instead of having hundreds of smallholdings all over the country, where everybody after four or five years asks what has been achieved. This is an approach which can be reproduced across the nation.’