IFC, the private sector development arm of the World Bank Group, has increased its presence in Papua New Guinea. Business Advantage talks to IFC’s Resident Representative in PNG, Carolyn Blacklock, about taking PNG’s private sector to the next level.

IFC’s Carolyn Blacklock

What is the status of the IFC’s own investment portfolio in PNG?

We continue to work with our existing clients, such as Bank of South Pacific, K K Kingston, PNG Microfinance Limited. We have a strong relationship with Digicel and a global relationship with an agribusiness trader called ECOM, which trades here as Monpi Coffee.

But we also have a number of potential partnerships, all of them Papua New Guinean-owned companies.

One is Lihir Integrated Livestock Limited, owned by Anitua, a land owner company on Lihir Island. It involves a piggery, poultry and egg production on Lihir, supplying NCS basically, but with an outgrower programme that will include Lihirans growing fodder. A very good project.

‘The natural entrepreneurial spirit of Papua New Guineans has for a long time not been able to emerge’

The other one is Kongo Coffee Limited, owned by a PNG national called Jerry Kapka, in Simbu Province, which is a very remote part of Papua New Guinea. With little else going on in the province, he supports up to 100,000 people from the province. So we would look to help the company win a greater share of market share, basically.

What is your assessment of the development of the private sector in PNG? What trends do you see emerging?

A real strength is in landowner companies and PNG businesses that have been running ten to fifteen years as small-to-medium size businesses that are now ready to step up to the plate to be corporations. To me, these are absolutely right for investment because they’ve proven that they can manage the risk and the seasonality and everything else that comes with running big businesses in PNG.

The natural entrepreneurial spirit of Papua New Guineans has for a long time not been able to emerge for whatever reason. Now with the plethora of opportunities plus legislation, quite frankly, that supports Papua New Guinean business, particularly around natural resource companies, you’re just naturally seeing some of those ideas percolate and become attractive investments.

But will those companies actually have the ability to be sustainable in the long-term?

You would probably say it would be doubtful as things stand, because they do need to be able to do more than just be a payroll company or a local counterpart, so our job is to come in and help them up to that next level.

This is the land of the joint venture, so instead of them winning the full contract on a major project, they tend to partner because they can’t actually get access to that expertise, proof of environmental and social management or corporate governance—a whole range of things—without joint venturing with an international company.

I think where they particularly need us is around equity and quasi-equity—being able to actually take that next step up into a listed entity or at least an owned-from-outside entity. They need the rigour that comes with that. So, our job is to help them make sure that they can live up to global standards and really that comes down to basic things like ensuring that they’ve got the right financial structures to cope with that, the right workplace health and safety to pass audits, the right senior management engaged who can chase those markets.

PNG desperately needs investment in infrastructure. What kind of role should the private sector play?

I think what we need is for the Government to facilitate private sector engagement into what we might see as being traditionally government-only services. By that I mean Public Private Partnerships, but in their truest form where we actually have private procurement of services, or private provision of services.

For instance, there’s nothing to stop us having a private hospital that provides public services for a fee, while we have still got the same quantity of private schools in the country even though people’s affordability and desire for private schools has actually increased. So, we’re not seeing investments yet come through in the private sector for education and health. It’s partly because the Government has not necessarily got the right enabling environment, as the private sector may feel that this is too risky. The Government doesn’t have to carry the whole burden of delivering these services, but the Government needs to facilitate the environment so that the private sector can invest.

The fact is that this is a country that does have experience in private sector engagement. You’ve got the private sector building infrastructure, so mining and agribusinesses are putting in roads and bridges and so on. But that’s not happening where I think Papua New Guineans would see the most impact: in things that affect everybody’s lives, like education, healthcare, road maintenance, power and ports.

This article first published in Business Advantage PNG 2012/2013