Business Advantage’s PNG 100 CEO Survey of chief executives in Papua New Guinea’s biggest companies found that last year’s profit expectations were ‘broadly met’ and that business leaders remain positive and confident in 2019.

More than three quarters of the interviewees believe that profits will rise in 2019. Credit: iStock/marchmeena29

This is the eighth year Business Advantage International has run the PNG 100 CEO Survey—its exclusive survey of the executives who run PNG’s largest companies. Each year, the survey aims to reveal the levels of business confidence by asking CEOs about their anticipated profit levels and expectations for investment and recruitment in the year ahead—2019. They also identify the key issues that they face in their business.

Profit performance in 2018 versus expectations. Credit: PNG 100 CEO Survey/Business Advantage International

Profits patchy

Twelve months ago, when we asked the CEOs what their profit expectations were for 2018, they were cautiously optimistic. About two-thirds were positive: half thought profits would ‘somewhat’ exceed the levels of 2017 and 15 per cent expected that they would be up ‘substantially’.

A year on and those expectations were broadly met.

More than half (56.7 per cent) said their performance was better than expected, with 10 per cent saying profits were up substantially (although this figure was down on the 15 per cent the year before). The number of respondents who said profits slightly exceeded expectations (46.7 per cent) was just over double the level in the previous year.

Thirty per cent said profits were in line with expectations, up from a quarter the previous year.

On the negative side, 13.3 per cent said they fell slightly short of expectations. Nobody said profits fell substantially short of what was hoped—an improvement on the previous year, when 6.2 per cent were in this category.

Profit expectations in 2019. Credit: PNG 100 CEO Survey/Business Advantage International

What will 2019 bring?

With some signs of economic recovery, it is not surprising that business leaders are reasonably bullish. More than three quarters (76.6 per cent) believe that profits will rise this year, up from 65.6 per cent figure in 2018.

The number of CEOs who expect profits to be substantially up was also higher: 23.3 per cent compared with 15.6 per cent in the previous year.

A tenth believe profits will be worse, while 13.3 per cent believe they will be the same, compared with a quarter in the previous year. Once again, no CEOs expect ‘substantially’ lower profits.

Investment intentions for 2019. Credit: PNG 100 CEO Survey/Business Advantage International

Investment & employment intentions

Investment and employment intentions are two useful indicators of business confidence. The patterns of intended investment suggest that business optimism is rising, with 43.3 per cent of respondents saying they will substantially increase their outlays, up from 37.5 per cent in the previous year. Thirty per cent expect to make a slight increase in investment, up from a quarter in the previous year and a return to the levels of 2017.

Only 3.3 per cent expect to make slightly less investment, down from 9.4 per cent in the previous year, and none said they would substantially decrease investment. This intensifies a medium term trend of increased investment as businesses position for the future, despite the difficult economic conditions.

Recruitment intentions are more conservative but still positive. More than half (53.3 per cent) expect to increase staffing levels, while 13.3 expect a sharp rise (slightly up from 12.5 per cent per cent in the previous year).

Levels of recruitment for this year. Credit: PNG 100 CEO Survey/Business Advantage International

Issues facing PNG business

While access to foreign exchange features again as a significant issue faced by PNG’s major businesses, it is superceded in this year’s survey by unreliable telecommunications, which is listed as the top impediment for the first time in eight years of our survey. It also implies that the Coral Sea Cable System, to be introduced in late 2019 (see page 41), will have a big impact on business in PNG. Foreign exchange is nominated by 63.34 per cent of respondents as a first order issue, down from 71 per cent in the previous year. It is considered ‘mission critical’ by 36.7 per cent of respondents, down from 41.9 per cent in the previous year.

Unreliable telecommunications was rated even higher than foreign exchange, with 83.4 per cent ranking it as a first order issue and 36.7 per cent saying it was ‘mission critical’. Other issues considered mission critical are: shortage of expertise and skills (30 per cent, up from 22.6 per cent the previous year), security and law and order (23.3 per cent, up from 9.7 per cent the previous year), and lack of government capacity (16.7 per cent, down from 22.6 per cent).

Impediments to business. Credit: PNG 100 CEO Survey/Business Advantage International

The 2019 PNG 100 CEO Survey was conducted by Business Advantage International between October and December 2018. The survey included senior executives from a representative sample of PNG’s largest companies, across all sectors of the economy.

The article was first published in the 2019 edition of Business Advantage Papua New Guinea, published this month.