The effect of the government’s proposed rice policy will basically ‘shut us down’, says Greg Worthington-Eyre, CEO of the country’s main rice importer and producer, Trukai Industries. His warning follows a prediction of price rises by the Independent Consumer and Competition Commission, and a warning by the Australian government the policy could breach WTO rules.

Rice fields

The Government was reported to have signed an agreement in April to develop one of the biggest agriculture projects in the country, a K7 billion (US$2.2 billion) rice venture in Central Province, as part of a policy for PNG to become self-sufficient in rice by 2030.

The Minister for Agriculture and Livestock, Tommy Tomscoll, said in 2015 that pioneering status, with accompanying incentives, would be granted to investors committing a large investment to develop large commercial scale mechanised irrigated rice farms. He also flagged the Government would establish a National Rice Import Quota System.

The agreement allegedly gave Naima pioneering status, awarding the company 80 per cent of the rice import quota. Naima is owned by Indonesia’s Mulia Group, owned by billionaire Djoko Tjandra.

However, the Prime Minister Peter O’Neill subsequently told the Parliament: ‘Cabinet has not made a firm decision.’ The Minister for Trade, Commerce and Industry Richard Maru also reportedly said that the advice he had received was that the agreement constitutes a ‘serious breach’ of PNG’s obligations under World Trade Organisation (WTO) rules, and was ‘likely to be illegal.’

Under the proposal, Naima would have 80 per cent of the market for 10 years, effectively a monopoly, according to the Independent Consumer and Competition Commission.

The other 20 per cent would be shared by existing rice companies, Trukai, NRD, and Homestate. Naima would not have to pay any duties on imports, and would get other tax benefits, that other importers would not.

Experience

Naima Agro Industries’ Djoko Tjandra. Credit: Tempo

Naima has no experience in the rice industry in PNG, but would be expected to spend more than US$2 billion and establish large scale (100,000 ha) highly mechanised irrigated rice farms with the capacity to produce over 300,000 tonnes of milled rice locally by 2030.

Analyst Anthony Swan at the Australian National University says however, the deal ‘will not require Naima to supply 80 per cent of the PNG rice market with domestically grown rice but instead allow it to supply it through imported rice.’

The Government’s longer term aim is self sufficiency, as described in Goal 2 of PNG’s Medium Term Development Plan. The aim is: ‘to support large scale agricultural enterprises and smallholder growers more generally to meet domestic and international needs.’

Trukai, two-thirds of which is owned by Australia’s SunRice and the rest by investment trustee, MTSL, trustees for the Pacific Balanced Fund which has about 40,000 PNG unit holders, is concerned the new policy will jeopardise its business in PNG.

‘We’re currently 75 per cent of the market. So obviously we would have to make a decision about whether we would want to have a presence at all in the country if the quota system is implemented,’ Greg Worthington-Eyre tells Business Advantage PNG.

Market share

‘We would end up with a slice of 20 per cent of the market, taking from us the majority of our business. So obviously we would have to make a decision about whether we would continue investing in PNG as a result.

‘We’ve got a massive infrastructure that we’ve built up over the last 46 and-a-half years, employing more than a thousand people and a lot of that would disappear with such a small slice of the market. So we’d have to downsize significantly, including laying off most, if not all, our staff.’

Trukai imports its rice from Australia and other countries, although Worthington-Eyre estimates about 50,000 tons of rice is currently grown in-country for local consumption at village level. Trukai is working towards boosting local rice production through a number of rice programs it has running.

In the last three years, Trukai has invested about K17 million on new rice projects, he says, and that would be wiped out.

Trukai CEO Greg Worthington-Eyre. Credit: Trukai.

‘If they want to force importers to engage growing rice in country then why don’t they just make it a condition of the import license?’

Price rise

The ICCC also predicted the policy would increase the price of rice, reduce the amount eaten in PNG and, because the policy gives generous tax breaks for the ‘pioneer investor’, provide no financial benefits to the PNG Government.

Prime Minister Peter O’Neill however has told Parliament he did not expect the price of rice to rise by 40 per cent,  and said the new policy would not create a monopoly.

‘Cabinet has not made a firm decision on any revision to the quota system but it is clear what must be done.’

PNG’s rice debate: other reactions

• Former Agriculture Secretary, Matthew Kanua tells Business Advantage PNG: ‘The concessions granted to this company are unprecedented and extraordinary. Will the government allow semiskilled, low paid foreign workers into the country to replace local labour? How is customary land being acquired? What are the benefits to land owners, if any?’
• The Chairman  of the Rural Industries Council, Sir Brown Bai, told the Post Courier he was  concerned that the government may be deciding too soon to give huge quotas and other incentives to ‘this new investor who has yet to develop commercial rice fields in PNG and to improve its commitment to PNG.’
• Australian Trade Minister, Steven Ciobo, has claimed that the proposed rice policy will amount to unilateral expropriation of an Australian investment (Trukai), adding it breaches PNG’s obligations under World Trade Organisation rules, and that the proposal may be in breach of an agreement between Australia and PNG to protect cross-border investments.
• A recent report prepared by PNG’s National Research Institute argues that ‘80% of the rice import quota should be allocated to the existing industry players on a pro rata basis based on their past performance.’