Senior executives of Papua New Guinea’s largest businesses are predicting increased profits, investment and employment in 2012 in spite of major challenges, according to a major new survey.

The PNG 100 CEO Survey, conducted by Business Advantage International between December 2011 and February 2012, asked the CEOs of PNG’s major companies across all sectors of the economy to answer questions about how profits were matching expectations and their plans for future investment and job growth, as well as the key issues facing their businesses.

Higher profits expected

Its findings show the country’s major employers are bullish about the year ahead, with almost 90 per cent of respondents expecting 2012 profits to exceed those of 2011. Remarkably, none expected a decline. This statistic is all the more impressive when the companies’ 2011 performances are taken into account: two-thirds of respondents said their 2011 profits had exceeded expectations and only 22 per cent said profits had fallen short of expectations.

Greater investment

There is evidence from the survey that these stronger-than-expected profits are being ploughed back into business. More than 57 per cent of respondents indicated that their own investment in new plant, equipment and other assets would increase in 2012, with a further 25 per cent saying investment would at least match 2011 levels.

Skills shortage

Two of these, the skills shortage and the lack of expertise, could be seen as symptoms of the increased economic activity that has accompanied the construction of the $US15 billion ExxonMobil-led PNG LNG Project. Finding and retaining staff in an over-heated job market is proving a challenge for even PNG’s largest companies. These issues are also, as CEOs told us, indicators of the need for better-educated and trained school leavers, tradespeople and graduates. They also suggest there are opportunities in PNG for providers of business services.

More jobs

There is also good news on the employment front, which is especially welcome given PNG’s low levels of formal employment.

Just over 50 per cent of responding CEOs said they were expecting to increase their headcount during 2012, with a further 40 per cent saying their staff numbers would remain steady.

Critical issues

While the survey reveals a positive picture of corporate growth, there are undoubtedly some major issues facing PNG’s corporates. We asked PNG’s top CEOs to rank various business issues on a scale from 1 to 5, where 1 meant the issue was not relevant to their business and 5 meant it was mission critical.

The four most critical issues were, in order:

• PNG’s skills shortage
• security/law and order problems
• getting access to necessary expertise and
• the lack of reliability of PNG’s state-owned utilities.

Interestingly, while law and order remains a critical issue (the costs of providing security remain a major impost on business), most employers were not as concerned about the likely effect of PNG’s national elections, which take place in mid-2012 against a background of political and constitutional tension.

Elsewhere, government performance remains an issue, as does the performance of state-owned utilities, while the total cost of employing key personnel (which can often involve providing accommodation, meals, transportation and other extras) is clearly a pressure on the bottom line.

Flying high

Overall, the business issues uncovered by PNG 100 CEO Survey are not a big surprise to those familiar with PNG’s business environment. What may surprise many, however, is that PNG’s top corporates are flying high in the face of such challenges.

This suggests two things. Firstly, there’s very good money being made in PNG now, despite the occasional bad headlines in the international media. Secondly, should much-needed reforms to state-owned enterprises, law and order and government bureaucracy occur, the current strong growth in PNG’s private sector could continue for many years to come.

This article first published in Business Advantage PNG 2012/2013