“You can’t market LNG on Zoom. Financing is the same. You need to talk face-to-face.”
—Wapu Sonk (Managing Director, Kumul Petroleum), talking to Business Advantage PNG this week

What do Virgin Australia, Westpac, Norton Rose Fulbright and Horizon Oil have in common? As you may have noted, they are all companies that have effectively signalled a scaling back of, or end to, their PNG presence in the past year.

BAI’s Andrew Wilkins

With Digicel and Heinz’s Hugo Canning rumoured to be on the market, and Barrick Gold’s future as the operator of the Porgera mine still unresolved, is PNG looking at a troubling exodus?

If so, what does that tell us?

Not just about PNG

The last 12 months have certainly been extraordinary on a global scale and, with the exception of Porgera, it would be misleading to portray the above cases as being solely about PNG issues.

While its telecommunications network in PNG certainly requires significant investment, Digicel’s debt problems are longstanding and sit predominantly with its Irish parent.

Meanwhile, Virgin Australia collapsed last year due to the global COVID-19 crisis (at one stage losing AUD$200 million a month) and has been re-born as a leaner operation under a new owner. Nevertheless, it cannot have helped that its administrator found around K27 million ‘trapped’ in its PNG bank accounts that it could not repatriate due to foreign currency restrictions (as reported by Simple Flying).

The future of Westpac’s Pacific business has been debated at board level for some years and it was just one of a number of the bank’s business divisions under review. PNG’s quieter economy since the completion of the PNG LNG project perhaps made it a less compelling asset.

Law firm Norton Rose Fulbright closed its Port Moresby office last July and now services PNG from Brisbane.

Ultimately, businesses have to adapt to survive and prosper and 2020 required more adaption than usual, in PNG and elsewhere.

Change = opportunity

As the Lae Chamber of Commerce’s John Byrne observes, the departure of expat business people, ‘creates a lot of opportunity for our local talent to shine and develop’.

It also helps if that talent is cashed-up. Some PNG companies are already rising to take advantage of the ‘exodus’ (such as it is). The sale of Hugo Canning to a fast-expanding Paradise Foods and Westpac Pacific to Kina Bank are already with the regulators.

While geo-political issues are coming into play regarding Digicel’s future, a new telco is waiting in the wings to enter the PNG market, in the form of Fiji’s ATH.

In announcing its departure from PNG late last year, Horizon Oil’s CEO Chris Hodge said ‘our ability to realise value in PNG was becoming increasingly long dated and uncertain.’ Was some of that uncertainty related to proposed reforms of the petroleum sector? If so, it didn’t stop Arran Energy taking over from Horizon.

Resources companies can come and go from PNG depending on where we are in the investment cycle. When I first travelled to PNG in 2006, membership of the PNG Chamber of Mines and Petroleum was low; within three years, it was booming again, as PNG LNG ramped up.

With the positive news about Papua LNG this week, we should expect many new faces in PNG (COVID permitting), as the FEED stage of the project begins.

Investment trends

It is worth noting too that PNG’s Investment Promotion Authority recorded more foreign investment enquiries in 2020 than in 2019, in spite of COVID.

Japanese and Chinese companies led the way, with more EU companies also expressing interest. Agriculture, ICT, consulting and tourism were the largest areas of interest – arguably an indicator of greater diversity in the economy.

The message is: don’t write off PNG. It has bounced back bigger and stronger before, and it will do so again. As Wapu Sonk’s quote at the top of this post suggests, the gradual return of face-to-face meetings will help.

Business Advantage/Westpac PNG 100 CEO Survey

For the past ten years, our PNG 100 CEO Survey has provided an annual snapshot of the business confidence in PNG.

The survey provides a picture of the profit expectations, investment and recruitment plans of PNG’s leading companies, and the impediments they face.

The 2021 survey is currently underway, in partnership again with our colleagues at Westpac. The results will be published at the end of April in the 2021 edition of Business Advantage Papua New Guinea, PNG’s most respected annual business and investment guide.

They should make for fascinating reading.

Andrew Wilkins is Publishing Director at Business Advantage International.