Cheap imports into Papua New Guinea are posing an increasing threat to local producers, with reports of foreign companies ‘dumping’ goods in PNG or under-declaring the value of imports.

Port Moresby docks

Imports are essential for any economy to function properly, but dumping—the importation of goods at or below their cost of production—is causing headaches for some of PNG’s producers.

The General Manager of Goodman Fielder’s operation in PNG, Peter Tannahill, estimates the company loses significant sales volume as a result of cheap and inferior flour imports.

When flour is transported in containers across the oceans and then sits on wharves for an extended period of time, it starts to deteriorate, he says.

‘We have a lot of flour that comes in, and quite honestly people get lured into buying it at very, very cheap prices. Often it’s because overseas suppliers are trying to clear it because they’ve carried it for a couple of weeks or a couple of months and its starting to deteriorate. So, they start dumping it in the market, and it causes absolute chaos.’

‘We don’t want tariffs to come down any further. They’ve already dropped by about 80% since the 1990s.’

Greg Worthington-Eyre from rice producer Trukai Industries sees blended varieties, ‘broken’ rice used in desserts, and the threat of cheap rice from Thailand as changing the dynamics in the lower end of the market.

He says the Thai government has been buying and storing rice worth about US$ 25 billion, expecting prices to rise.

Impact on livestock

While he does not regard it as dumping, Phil Leahy, Managing Director of Zenag Chicken, says the importation of cheap poultry has meant Zenag will be winding down its chicken farming and processing section.

Another chicken producer, Mainland Holdings-owned Tablebirds, is also affected by cheap imports, according to its Corporate Affairs and Research Manager, Dr Keith Galgal.

‘Imported products are landed in Papua New Guinea at costs lower than our costs of production, so the first thing we have to do is look at ways we can reduce our cost of production—to be competitive without comprising quality.’

The company is looking to reduce the cost of stock feed by using local alternatives to imported wheat and soy bean, such as cassava root flour and fishmeal, a by-product of PNG’s fast-developing fish processing industry.

Michael Kingston, General Manager of industrial supplies manufacturer K K Kingston, says cheap imported toilet paper is the main product category affecting his business.

‘Toilet paper is also used by some companies to top up a container. They are then happy to distribute it in the market very cheaply,’ he says.

Meanwhile, Stan Joyce, General Manager of S P Brewery—PNG’s only major brewer—points out that excisable products such as beer are protected from cheap imports or dumping. Nevertheless, he is adopting a wait-and-see attitude towards its recently-launched Heineken brew ‘as to whether or not people try to do that to us’.

Falling tariffs threaten sector

While he acknowledges that imports are an inevitable part of the competitive landscape—and, in many instances, in the best interests of consumers—Murray Woo, Chairman of the Manufacturers Council of PNG, says his members want a level playing field, so they can compete effectively and to continue to provide employment to Papua New Guineans.

The high cost of doing business makes things hard enough for manufacturers as it is, but an area of particular concern is falling tariffs. Under APEC, of which PNG is a member, tariffs are due to disappear altogether by 2020.

‘We don’t want tariffs to come down any further. They’ve already dropped by about 80% since the 1990s,’ says Woo.

‘Even with tariffs averaging 20%, imports are still typically 15% cheaper as it is.’

Woo believes a compromise would be to reduce tariffs on those goods PNG does not produce, which would deliver lower prices on many imported goods, while still supporting local industry.

This article first published in Made in PNG 2014, which is published by Business Advantage International this month, in association with the Manufacturers Council of Papua New Guinea.