The Business Council of Papua New Guinea’s second Market Conditions Survey has found almost eight out of ten respondents did not meet their projected revenue and profit results for the first half of 2020.

PNG’s hotels and resorts have been particular affected by the COVID-19 pandemic.  Credit: BAI

Papua New Guinea’s tourism and hospitality sectors have been the hardest hit, according to the survey of 257 respondents, with professional services, retail and consumer goods, manufacturing, real estate and property and construction also severely affected by the COVID-19 pandemic.

‘PNG businesses continue to struggle financially,’ the survey summarises.

‘A majority of the respondents did not meet their projected revenue and net profit for second quarter and first half of 2020. This finding shows that not much has changed in the financial health of PNG businesses since the Business Council of Papua New Guinea (BCPNG) conducted its Q1 survey in May.’

‘To help businesses recover, respondents say that it is essential for the Government to pay off its debts to the private sector.’

The survey said that weak market demand and the closure of operations due to COVID-19 restrictions ‘remain the top drivers of revenue decline for PNG businesses’.

‘Forty-five per cent of business leaders attributed the revenue decrease to a weaker demand due to their products and services being deemed as non-essential and as their customers scale down operations. This is a slight decrease from 47 per cent in the first quarter.

‘On the other hand, 21 per cent cited the closure of their operations due to COVID-19 restrictions as the primary reason for revenue decline, which is fewer than 35 per cent in the first quarter.’  Fewer businesses ceased operations in the second quarter than in first quarter, however.

Reduced headcounts

OTML has reopened operations. Credit: OTML/Linkedin

The BCPNG survey found that there was a slight increase in businesses reducing their staff numbers to keep their businesses afloat.

‘Since March 2020, 19 per cent of businesses surveyed have reduced their headcount, an increase from 12 per cent from the first quarter. However, 67 per cent of businesses are not considering staff reduction in the next three to six months.’

On a positive note, more businesses believe that they will be able to operate in the current environment for more than 12 months.

‘This has increased to 51 per cent [in the second quarter] from 34 per cent in the first quarter. This improvement could be attributed to the dialogue between business and the Government, the implementation of the self-regulation policy for businesses and the consistency of the regulations issued by the Government.

‘It also indicates that businesses could already be reaping the benefits of the structures and processes that they have put in place earlier this year to navigate the challenges of COVID-19.’

‘The proposed measures to the Government also highlight the strong need for policies aimed at economic recovery such as advancing resource projects.’

Stimulus concerns

The effectiveness of the government’s fiscal response is called into question, however, with 67 per cent of respondents describing the Government’s stimulus package as not effective.

‘[They] are yet to see any tangible results and outcomes. To help businesses recover, respondents say that it is essential for the Government to pay off its debts to the private sector, as well as create an investor-friendly environment that prioritises the acceleration of resource projects.

‘As a result of a reduction in investment, we can expect a decrease in initiatives that could potentially generate market demand and new employment opportunities.’

‘The proposed measures to the Government also highlight the strong need for policies aimed at economic recovery such as advancing resource projects, encouraging consumer spending and helping businesses recover through tax relief measures.’

Strategies for survival

The survey found two of the top priorities for business are permitting inbound overseas travel for workers, and allowing all establishments to operate as long as they follow health protocols.

In the meantime, ‘to manage their financial situation, businesses continue to implement the following strategies: containing costs, as well as deferring or cancelling planned investments and capital spend.’

The BCPNG survey points to a continuation of weak market conditions.

‘As a result of a reduction in investment, we can expect a decrease in initiatives that could potentially generate market demand and new employment opportunities.’