Papua New Guinea’s tourism, manufacturing, retail and agriculture should be the main targets for further government support, contends Douveri Henao, Executive Director of the Business Council of Papua New Guinea. He also reveals the sectors that had received the biggest boost during the COVID-19 crisis.

The Business Council of PNG’s Douveri Henao was cautious about about the government’s strategy for economic recovery, warning that the ‘devil is in the detail’ in the 2021 National Budget.

Speaking during a BusinessAdvantage PNG online budget briefing, he said 80 per cent of chief executives in the Council’s latest survey believe they will not make budget projections in the first half of 2021.

‘We asked businesses, when the K280 million stimulus package was pushed out in April, how many benefited? Just one per cent benefited; 67 per cent said: “We have got no idea what it is,” and a further 65 per cent said it was ineffective.

‘We have a fair idea where the rescue needs to happen. And we have got a fair idea who needs to be paid [their outstanding] debts. The tourism sector is definitely running dry because of the shut downs. Communities that rely on the tourism base have completely dried up … That sector has completely vanished in 2020 and definitely needs a rescue.’

‘ICT (information and communications technology) businesses have also thrived as companies looked to semi-automate their business processes and business engagements. Likewise, ecommerce is also booming.’

The manufacturing sector also urgently needs assistance.

‘[The decline] has been ongoing since 2014 but COVID-19 exacerbated it, largely through the inability to sell in the market. Most of the operating expenditure of manufacturers remained stagnant; it didn’t drop. Then, of course, in the retail space [stimulus is needed] as well. We have seen consumption drying up.’

Henao added that he expects revenue to pick up for retail in the Christmas period.

Booming sectors

The Business Council of PNG’s Douveri Henao

Henao pointed to areas of the economy that have done well.

‘All of the FMCGs (fast-moving consumer goods companies) indicated massive spikes in their sales figures. Who benefited from the stimulus? Your SP Breweries, your Cokes and your noodles companies. Is that a good reflection on the stimulus? Perhaps not.’

Henao said that import substitution has ‘kicked in big time’ in Papua New Guinea. He pointed to the dairy producer Ilimo Dairy Farm as a case in point.

‘Their sales team expected that, when the expatriate community moved out because of COVID-19, that the fresh milk [sales] would drop. They didn’t; they actually grew 40 per cent.’

ICT (information and communications technology) businesses have also thrived as companies looked to semi-automate their business processes and business engagements. Likewise, ecommerce is also booming.

‘We are beginning to see what a lot of people anticipated after 2018 APEC – a rush on digital commerce. We are now seeing that happen in 2020. I am confident in 2021 we are going to see that grow [further].’

A big issue for business is unpaid debts owed by the government. Henao said 70 per cent of the arrears is owed to the superannuation funds and he urged a focus on the government’s obligations to smaller businesses.

‘If the Treasury can develop an SME expressway – pay the SMEs first – the big end of town can hold off for a couple of months.’

A-minus or B-plus?

Henao said that discussions between the Business Council of PNG and the government have proven effective in managing the COVID-19 crisis this year.

‘By being inside that foxhole with them from day one, we have seen the maturity of the dialogue growing. That dialogue has [led to the] government appreciating [why] self-regulation is an important part of the market continuing.

‘In April, 67 per cent of businesses said they were not going to be around for the next six months if the March-April protocols applied. When we ran that same survey in August, with at least two months of the self-regulation protocols, 61 per cent came back and said: “We are going to be open for the next six months”.

‘We also saw what was a very high rate of unemployment begin to level off. CEOs and MDs are confident they can retain staff.’

Henao said the response ‘demonstrates the importance of having a robust public–private dialogue’ during such great economic volatility. ‘That is an A minus, B plus, on government’s ability to engage with us.’