It’s critical for the future of Papua New Guinea’s forestry and manufacturing sectors that the Government’s planned 40,000 ‘affordable houses’ be built in PNG by local suppliers, industry leaders tell Business Advantage PNG.

PNG Forest Product’s Tony Honey

The O’Neill government announced plans last June for the National Housing Corporation to build a total of 40,000 affordable homes in Port Moresby to relieve a housing shortage, to be funded with offshore finance.

But the Housing Minister Paul Isikeli has suggested suspending import duties on prefabricated houses built in China for this project, a move both the Executive Director of the peak industry body, the PNG Forest Industries Association, Bob Tate and the Managing Director of the country’s largest processing timber company, PNG Forest Products, Tony Honey have criticised—as has the Manufacturers Council of PNG.

Adding-value

They say it will defeat the government’s own policy of boosting the downstream processing of raw timber to 80% by 2030.

Planning Minister, Charles Abel

‘Unacceptable,’ and not in the best interests of local manufacturers that employ thousands of Papua New Guineans, is how Honey has described the possibility of suspending import duties.

‘The rationale behind that idea is that there isn’t the domestic capacity to provide that volume of houses,’ he told Business Advantage PNG.

‘But the domestic capacity has been untested.

‘Certainly, building 40,000 houses in one year would present difficulties for the manufacturers … In the absence of any set time frames for these houses to be supplied and constructed, it is very difficult to determine if the local manufacturers have capacity or not.’

As well, the Planning Minister Charles Abel has indicated he wants to build 2,000 affordable homes in each province, taking the total possible number of new homes to 80,000.

‘The rationale behind that idea that there isn’t the domestic capacity to provide that volume of houses. But the domestic capacity has been untested.’

Honey says the potential obstacle to this is construction capacity throughout PNG:

‘If PNG does not have the construction capacity and international companies were required to move into PNG then I would hazard a guess that the houses could well be no longer affordable.’

Counterproductive

The PNG Forest Industry Association’s Bob Tate

The Forest Industries Association’s Bob Tate has told Business Advantage PNG dropping import duties would defeat the purpose of the government’s policy of adding value to raw logging.

He says, however, the houses are being funded by China’s Exim Bank and one of the conditions may be that Chinese expertise and materials be used on the housing project.

‘There are several timber house manufacturers plus several steel house manufacturers in PNG and it’s important to our industry that this project be developed by local companies in the first instance,’ says Tony Honey.

‘We (PNGFP) employ a lot of people. We are probably the biggest manufacturer of prefabricated buildings in PNG and the industry is not competitive enough for the export market.’

Hard to compete on exports

Tate agrees.

‘We face significant competition in our Asian markets from the softwood producers.

‘For example, New Zealand exports of timber into China are nearly four times the level of PNG,’ he says.

‘I can’t export pine timber to Australia because I can’t compete with NZ or Australian domestic suppliers. So, we are really bound to a domestic market. Any value-adding in the sector would be for a domestic market.’

‘Exports into the Asian markets are rocketing ahead from North America, Canada and far eastern Russia.

‘We do not have the potential to compete with their scales of production.’

Honey says PNG is barely competitive in processing in Australia.

‘I can’t export pine timber to Australia because I can’t compete with NZ or Australian domestic suppliers,’ he notes. ‘So we are really bound to a domestic market. Any value-adding in the sector would be for a domestic market.’