The timing of new tariffs affecting Papua New Guinea’s agriculture sector could not come at a worse time, according to the CEO of the country’s largest employer, New Britain Palm Oil. Jamie Graham tells Business Advantage PNG they could affect jobs and foreign investment.

A view from above: New Britain Palm Oil’s plantation. Credit: NBPOL

PNG’s agriculture sector is bracing itself for a range of new tariffs and fees, which were expected to be introduced this month. It’s not great timing, according to the CEO of PNG’s largest agribusiness.

New Britain Palm Oil Ltd CEO Jamie Graham tells Business Advantage PNG that the palm oil business has already been hit by demurrage quarantine costs, low export prices and stagnation in production, and that new tariffs aimed at the agriculture sector are yet another stress.

‘The additional charges are putting undue pressure on an industry that has seen the bottom fall out of commodity prices,’ Graham says. ‘For instance, at the beginning of the year we were getting $US840 (K2910) per tonne for CIF [delivery to] Rotterdam and then, in a matter of a few months, it crashed to $US530 (K1836) and that was purely because of COVID.’

The palm oil price recently recovered to around $US600 (K2079) but ‘now the government wants to start imposing penalties and it just makes it very difficult,’ adds Graham

New charges

The levy and fee increases on fertiliser and fuel were imposed by the Climate Change Development Authority and the Department of Labour and Industrial Relations on the cost of certification of boilers, crude palm oil tanks, palm kernel oil tanks, fuel tanks and pressure vessels. There were also tariffs on fertiliser and fuel.

‘We will have to review our costs and this may well mean that hundreds of Papua New Guinean jobs may be lost.’

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The tariffs were to be implemented on 1 July but have yet to have officially commenced, suggesting there may be some hope for a reversal.

‘It will be better for agriculture as a whole if it doesn’t get implemented,’ Graham says. ‘Not just the palm oil industry.’

Impact on investment and jobs

NBPOL’s Jamie Graham. Linkedin

NBPOL is the biggest employer outside of the government, with a huge private sector workforce, and Graham points out that the neighbouring Solomon Islands has not made a similar move.

‘We were completely blindsided by this and there was no consultation with industry whatsoever. We will have to review our costs and this may well mean that hundreds of Papua New Guinean jobs may be lost.’

Local job losses is something that NBPOL has long sought to avoid, with a rationalisation last year reducing the number of expats from 115 to 95 without any Papua New Guinean redundancies, and the company has avoided wholesale redundancies of workers during COVID-19. ‘But that may well change now,’ Grahams says.

He points out that the fuel and fertiliser levy will also have a negative effect on smallholders. ‘It is difficult enough to get smallholders to use fertiliser that we as a company have subsidised,’ he explains. ‘Any increase on fertiliser is going to directly impact smallholder productivity.’

With 30 years in PNG’s agricultural sector, Graham is also concerned about what sort of message these sudden tariffs send to international investors at a time when foreign money is key to helping the nation during the global pandemic. This is apparent from his dealings with NBPOL’s parent company, Sime Darby Plantation.

‘Sime Darby’s view of NBPOL was it was one of its few areas where there would be expansion and investment. This was borne out by the purchase of Markham Farming and we have commenced work on a 40-tonne mill at Erap,’ Graham says. ‘But with the way that the government is making noises about Take Back PNG, I am not so sure Sime Darby is going to be so thrilled about continued investment in PNG.’