Business in Papua New Guinea has responded well to COVID-19 but is now facing a downturn at the lower end of expectations. David Toua, board member of the Business Council of Papua New Guinea says the focus now needs to turn to the economy.

David Toua. Credit: PNG Chamber of Mines and Petroleum

In April, the Business Council of PNG (BCPNG) compiled three possible scenarios for how PNG’s economy would be affected by the COVID-19 pandemic, including a downside scenario and an upside scenario. The third, a middle scenario, was then considered the most likely outcome. It anticipated:

• A moderate decrease in oil and LNG prices
• Mining and oil and gas exports to decrease slightly
• COVID-19 restrictions to be effectively implemented;
• The government’s K5.6 billion stimulus package to offset the decrease in consumption and business activity

BCPNG board member David Toua said now, however, the Council’s downside scenario, which anticipated a large drop in oil and gas prices and resources exports, and suggested any government stimulus would fail to offset the drop in consumption in the wake of the pandemic, is now considered the most likely to occur, with consumption only back in line in 2022.

‘We are now in recession. The key message from business to government is that we have to address the consumption deficit.’

‘According to the information we have been receiving, we are tracking towards the lowest of these lines and this is something that needs to be addressed,’ Toua said. ‘The actual message is that we have had a significant drop in GDP where we had hoped that GDP would be a slightly positive figure. We are now in recession.

‘The key message from business to government is that we have to address the consumption deficit.’

Getting priorities right

Prime Minister Marape and Pandemic Controller David Manning announce POMs second lockdown. Credit: Prime Minister Office NEC/Facebook

Toua said COVID-19 issues have slipped down the order of priorities with business because of the ‘pragmatic approach by the Controller and the Government of PNG’, which has allowed business to resume.

‘In terms of a report card, we have scored a B. In effect, it has worked because of the trust that the Controller and government have invested in business to self-regulate and we do see commerce operating as best as it can in the new normal.

‘In terms of the economic recovery, though, the graph is getting steeper in its downward trajectory.’

Toua said just over half of the respondents to the Council’s second quarter survey expected to be ‘around for 12 months’, which was up from 34 per cent in the first quarter. But he warned that a year ‘is actually a really short window’ and challenges remain.

‘While there is an upsurge in optimism, unless we address that freefall, the picture then reappears and probably in a more dire form.’

‘It is really not a COVID-19 conversation any more, it is an economic discussion.’

Toua said 62 per cent of businesses are expecting to pay less tax, which will have a ‘big impact’ on government revenue. He said the government’s stimulus package has been seen as ‘disappointing’ by business.

‘Only one per cent said they benefited from the stimulus package and 68 per cent said they hadn’t benefited in any way; 31 per cent said they weren’t aware of any impact.

Toua said that fostering investor confidence by green-lighting some of PNG’s planned new resources projects was also crucial.

‘We need income and that income from the projects has a really significant knock-on effect to the rest of the economy.

‘A lot of people were also saying they want government to make good on paying the outstanding debts. Some of what the government owes has quite a lot of age on it. The rationale is that if we can have that money, then we can pour it into the business and it can make its way back into the economy.

‘We have adjusted to the new normal. It is really not a COVID-19 conversation any more, it is an economic discussion. We would love to have a discussion about an economic package that is economic-related rather than COVID-19 related.

‘There is a lot of comment coming from business that maybe this is an opportunity to improve on tax collection and increase policing of business that are clearly avoiding paying tax. All of a sudden, you are recovering revenue that you weren’t getting before.’