Chey Scovell, CEO of the Papua New Guinea Manufacturers Council, talks to Business Advantage PNG about how his sector is confronting the challenges of the new normal and an uneven playing field.

Practising COVID-19 social distancing. Credit: Olam International

Being a broad collection of businesses, Papua New Guinea’s manufacturers have had mixed fortunes during the rollercoaster ride that has been the country’s pandemic response.

Scovell tells Business Advantage PNG that, while local FMCG producers like Paradise Foods, Nestlé and GFI have seen demand for their biscuits, flour and chocolate, ‘you talk to the more industrial people and there is hardly anything out there at all’.

While members of the Manufacturers Council of PNG are doing their best to adapt to the niupela pasin (new normal), Scovell is scathing of rogue manufacturers that operate outside of the law.

‘The new normal has just added a new level of compliance and the people who are not doing that are doing better,’ he says of black market operators. ‘Compliance with the new normal [means] higher operating costs and reduced turnover. So, if everyone was in that position you are going along the same. But how do you hang in there when people are not having the same compliance costs? It’s a bit like tax; we have legitimate people who are going out of business because of these new manufacturers who are not complying.’

‘The reality is [that] in any country around the world the biggest customer is the government and this government has almost no money.’

Scovell says that the new rules need greater compliance, greater policing and greater clarity. He says the Council is working with the government and business to provide a more prescriptive definition of the rules.

The challenges ahead

The Manufacturers Council of PNG’s Chey Scovell

While he acknowledges better internet services and more stability in PNG’s power supply are positives for local manufacturing, Scovell says that one of the major challenges currently is dealing with the government itself.

‘The reality is that, in any country around the world, the biggest customer is the government and this government has almost no money. That is not an indictment but they have serious cash flow problems and serious creditors, including local manufacturers. And, when they are getting money, they are not settling it with their creditors,’ he said.

‘Not having the government as a reliable purchaser of manufactured goods leads to a lack of confidence. You can see the confidence grow when the government does get an injection of cash and starts spending.

‘The fundamentals are still here, we still have a population of 13 million that want to come from subsistence agriculture to living to the modern world.’

There are also murmurs about the stability of the government itself, with speculation about a possible no confidence motion in November against Prime Minister James Marape. Scovell says that is adding to the general sense of instability.

‘The position of business is that any change is going to be negative,’ he says, noting that with any major shift in leadership comes inevitable upheaval, something PNG does not need.

Local content

While Scovell says new resources projects – if and when they occur – are needed to boost PNG’s manufacturing sector, he also observes that existing projects could do more for the local economy.

‘If you take a company like Newcrest: by and large, they are a good corporate citizen,’ Scovell says. ‘But they are still insisting on things being fabricated out of Australia, which is really disappointing if you can get it here locally in all of the same specifications – and probably at a lower price.’

He also says the government should be doing much more to enforce the local content provisions in its procurement contracts.

In spite of the challenges, however, he notes PNG’s economy has shown itself to be very resilient in the face of the global pandemic and still has rich potential.

‘The fundamentals are still here, we still have a population of 13 million that want to come from subsistence agriculture to living to the modern world,’ he says.