Business Advantage’s PNG 100 CEO Survey of chief executives in Papua New Guinea’s biggest companies has found that profit expectations were only partly met last year, but there are signs of growing confidence in 2018.

This is the seventh year that Business Advantage PNG has run the PNG 100 CEO Survey—our exclusive survey of the executives who run PNG’s largest companies.

Each year, the survey aims to reveal current levels of business confidence by asking CEOs about their anticipated profit levels and expectations for investment and recruitment in the year ahead—2018. We also ask them to rank the key issues they face in their business.

Profit performance in 2017 versus expectations. Source: PNG 100 CEO Survey/Business Advantage International

Profits patchy

Twelve months ago, when we asked the CEOs what their profit expectations were for 2017, they were mostly optimistic.

Over two-thirds were bullish. Half thought profits would ‘somewhat’ exceed the levels of 2017, and 15 per cent expected that they would be up ‘substantially’.

‘A quarter said profits were in line with expectations.’

A year on, and those expectations have partly been met, although the result is patchy.

Fifteen per cent said profits were up substantially—an exact match on what they expected. But only 22.8 per cent reported profits were up ‘somewhat’—less than half the level expected.

A quarter said profits were in line with expectations, while 31.2 per cent said profits were ‘slightly below’ expectations.

There were only a few big losers: 6.2 per cent said they recorded profits substantially below expectations, which was a better result than the previous year, when 17.5 per cent were in this category.

Profit expectations in 2018. Source: PNG 100 CEO Survey/Business Advantage International

What will 2018 bring?

Despite the mixed economic conditions business leaders remain generally optimistic.

More than two-thirds (65.6 per cent) believe that profits will rise this year, although this is down from the 77.5 per cent figure in the previous year.

‘No CEO expects substantially lower profits.’

The number of CEOs who expect profit to be substantially up (15.6 per cent) is the same as last year. A quarter believe that profits will be the same and no CEO expects substantially lower profits.

Investment intentions for this year. Source: PNG 100 CEO Survey/Business Advantage International

Investment intentions

Investment and employment intentions are two useful indicators of business confidence.

The patterns of intended investment suggest that business optimism is higher than it appears: 37.5 per cent of respondents say they expect to make a ‘substantial’ increase in investment next year and a quarter say they will make a slight increase in investment, which is down from 31 per cent in 2017.

‘This continues a medium term trend of most respondents expecting to increase or maintain investment levels.’

Only 9.4 per cent expect to make substantially, or slightly, less investment, compared with 14.3 per cent in the previous year.

This continues a medium term trend of most respondents expecting to increase or maintain investment levels, despite the difficult economic conditions.

Recruitment intentions for 2018. Source: PNG 100 CEO Survey/Business Advantage International

Recruitment

Recruitment expectations are neutral. No respondents expect a substantial reduction in staff numbers, the same as last year.

‘Once again, access to foreign exchange features as the most significant issue.’

The majority, 81 per cent, expect staffing to be either the same or slightly up, while 12.5 per cent expect a sharp rise (up from 9.5 per cent in the previous year).

Issues facing PNG business

Once again, access to foreign exchange features as the most significant issue. It is nominated by 71 per cent of respondents as a first order issue, up from 59.5 per cent in the previous year. It is considered ‘mission critical’ by 41.9 per cent of respondents and ‘very important’ by 29 per cent.

Other issues considered mission critical are: lack of government capacity (22.6 per cent, up from 21.4 per cent), shortage of expertise and skills (22.6 per cent, the same as the previous year), unreliable telecommunications (16.1 per cent, down from 28.6 per cent in the previous year), and security and law and order (9.7 per cent, down from 24.4 per cent).

Impediments to business

The 2018 PNG 100 CEO Survey was conducted by Business Advantage International the last quarter of 2017. The survey included senior executives from a representative sample of Papua New Guinea’s largest companies, across all sectors of the economy.