More than 400 delegates attended the inaugural SME Summit in Madang earlier this month. PNG’s Indigenous Business Council President Sir Nagora Bogan explains what will be required to encourage more Papua New Guineans to start their own small- and medium-size enterprises.
President of the Indigenous Business Council of PNG, Sir Nagora Bogan
Business Advantage PNG (BAPNG): How important is small business development for Papua New Guineans?
Sir Nagora Bogan (NB): Small business development for Papua New Guineans is going to be a very important movement that will redefine the political, social and economic fundamentals of PNG.
In the economic structure of many countries, SMEs (small and medium-sized enterprises) fill in the tier of a middle income sector and in many cases—as in New Zealand and Malaysia—become a substantive economic mainstay by creating employment, contributing to GDP, re-investing back in the local economy and have many other multiplier effects.
Hence, we must ensure that the majority of our people in the peri-urban and rural areas have the same opportunities as Papua New Guineans in the urban areas.
It is going to be a paradigm shift starting with Government—the principal policy framers—civil service, private sector and civil society.
BAPNG: Papua New Guinea’s Government has an ambitious target of creating 500,000 locally-owned businesses over the next 20 years. Is this realistic?
NB: I do not think it is a far-fetched notion or an unrealistic objective, but we have to start from somewhere and aim for a number—even if it is a metaphorical journey. At least it provides some quantifiable game plan and I am hopeful that 20 years is long enough tenure to achieve 500,000 SMEs.
‘I already know first-hand stories of men and women who have ascended from betel nut selling to running PMVs and truck and hire car businesses, and one who has gone from bottle selling to being a millionaire.’
BAPNG: What sorts of small businesses do you have in mind when you talk about small businesses. I assume your concept is far more than simply selling betel nut?
NB: Over the years, many pioneering Papua New Guineans have successfully moved from a life of subsistence farming to business entrepreneurship in mid-sized businesses, and then to large scale businesses, rendering both services and goods.
These are exceptions, but we need to make it a norm that people can graduate from betel nut selling through to micro or cottage business and then to medium-to-large scale businesses.
I already know first-hand stories of men and women who have ascended from betel nut selling to running PMVs and truck and hire car businesses, and one who has gone from bottle selling to being a millionaire who owns several properties and businesses in Port Moresby and Lae.
BAPNG: What is required to enable PNG nationals to get involved?
NB: Firstly, we have established the Indigenous Business Council to ensure that we have a critical mass of Papua New Guineans with a cohesive and unified voice representing the interest of the majority of our people.
We would like to mobilise and empower our people to move from being passive spectators to becoming active participants in economic activities.
Through this, and with the active political support of our champion politician, Minister for Commerce and Industry the Hon. Richard Maru MP, the Government has provided in the 2013 budget funding to the National Development Bank of K150 million for SMEs.
These funds are accessible for our indigenous people, but are subject to appropriate lending strictures such as business competency, strong and viable business proposition, counterpart funding, ability to service loan etc. These funds are borrowed at a very low interest rate of 6% compared to the average business loan offered by commercial banks of between 14 and 18%.
BAPNG: What must the government do, apart from allocating funds to allow people to borrow?
NB: We have elevated the SME cause to the highest level of the political domain. Beyond allocation of funding and sporadic intervention, the Government needs to lead and own the SME reform.
This policy must address not only policy, but also legal and regulatory, process and institutional considerations and pertinent considerations such as simplifying business registration and licensing, enabling better access to finance, reduction in cost of public utilities such as power and water, improving governance and transparency in land registration and allocation, and so on.
BAPNG: People would need to learn about how to run a small business, for instance: management skills, accountancy, time keeping, records, pay taxes etc. How could this be done?
NB: Presently, the Small Business Development Corporation (SBDC) runs basic entrepreneurial skills and competency training.
It has done this with the help of the United Nations’ International Labour Organisation. It starts with the basics of knowing about business, with incremental graduation to starting a business, then expanding your business.
Realistically, we will see failures but we must ensure that we have in place systems and processes to mitigate failures.
This training incorporates management skills, basic accounting, time management, and business taxation. Through this SBDC initiative, over 10,000 entrepreneurs have been trained, out of whom 800 are women.
It is also proposed to the Government to establish training in business and entrepreneurship for school leavers, persons in the SME sector and all other citizens who are not in the formal education system.
BAPNG: Do schools play a role in this process?
NB: Yes, schools will play a big part in growing entrepreneurial competency and skills. We have recently recommended to the government that business and entrepreneurship skills be incorporated into the general school curriculum as a core subject such as Maths, Science and English. We also further recommended that accredited modules be developed and incorporated into tertiary and TVET (Technical Vocational Education Trade) programs.
BAPNG: What kinds of businesses do you see women developing?
NB: Many Papua New Guinea women are quite resourceful and have excelled successfully in many businesses. Some own hire car businesses, recruitment and training service businesses, cleaning and laundry services, accounting and financial services, horticultural, tourism and hospitality, small scale processing businesses, and even professional services such as health, engineering and architectural firms.
In fact, many Papua New Guinea women have excelled and expanded into business areas that were once reserved domains for men and I see this trend continuing and intensifying.
BAPNG: How do you monitor the success of small business given that, across the world, two-thirds fail in the first two years?
NB: The statistics for business failures appear to be universally consistent and Papua New Guinea is no exception.
Realistically, we will see failures but we must ensure that we have in place systems and processes to mitigate failures.
One such measure is to develop and adopt a standardised national diagnostic assessment tool for measuring and developing capacity and competency of SMEs. This will not entirely eradicate failure but at least it enhances the scope and prospect for success.
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Sir Nagora Bogan is a well respected statesman. I had discussion with him twice and find him very interesting as he had a heart for our beautiful nation Papua New Guinea. He wants to make sure we all benefited in the economy and have a prosperous life.
We need more of such well respected and truthful leaders who have such characteristics and values. We need to work together to make Papua New Guinea a prosperous economy in the near future and Small -Medium Enterprises(SME) policy is the way to go.
I support you Sir Nagora and look forward to work with you to build our economy beyond the boundaries.
Sir Nagora Bogan, one of our very experienced statesman, businessman whose currently sits on the board of very important PNG institutions has answered some of pressing issues, and fears that the SME is faced with, the leakage of capital flows that can happen within the economy, and its very encouraging that our Govt officials and senior business executives and statesmen are all looking at it from different angles in making sure that a national mechanism in holding back capital flows from resources sector is in place for our people now and into the future, and as far as providing sustainable business for the future generation is concerned,However, another area where, there is a growing concern is the human resources sector, where National Home grown companies are concerned, where Nationals must be encouraged and be equipped to take on key leadership roles in both resources companies, and organisations, a case in point and example is BSP, where the first, second and third tier of executives are expatriates, and only three nationals in a company thats home growned and and internationally now recognized as the fasted growing Bank (BSP), I hope that governments needs to look into these, because huge expatriates salary bills will become the norm when companies grow from cottage industries into corporate conglomerates, and the leakage in salary bills will be a set back for the SME.s to retain much of the capital inflows. Its also important that every opportunity to retain wealth within the economy must be considered in all angles, and its welcoming that, our Statesman, Sir Nagora is spot on.