The coming year looks promising for Papua New Guinea business, with the giant PNG LNG project due to commence gas exports, and further investments looking likely. Meanwhile, eyes are on the O’Neill Government to see how it can improve the operating environment for business. Business Advantage PNG looks ahead to consider what 2014 may bring.

Port Moresby ‘Town’, with Steamships’ harbourside development under construction.

Mining and petroleum

After a five–year development phase, the ExxonMobil-led  PNG LNG plant prepares to export its first shipment in the second half of 2014. A second LNG project may be on the way, after InterOil teamed up with Total SA to explore its Elk–Antelope fields. The national government expects a third, smaller project, the Stanley gas project, to commence by year’s end.

Meanwhile, after a tough year for the mining sector, which has been forced to cut back on exploration and reduce operating costs in the face of lower commodity prices, all eyes will be on the O’Neill Government, which has been drafting revised Mining Act.

What mines may emerge to replace the tiring Ok Tedi mine? Is the worst over or are there more cuts to come? Some may see the announcement that the Morobe Mining Joint Venture is moving ahead with a feasibility study for the Wafi-Golpu gold, copper and silver project as a promising sign, but another project in the pipeline, the Nautilus Minerals Solwara 1 undersea mining project, is still in abeyance pending negotiations with the government.

In Bougainville, the President of the Autonomous Bougainville Government, Dr John Momis, says the push to revive the Panguna copper mine will slow, as landowners cannot agree on the proposed Bougainville Mining Act.

Agriculture

Prices continue to be volatile for several of PNG’s agricultural exports, with palm oil prices—now PNG’s largest commodity export—likely to remain low for the time being. Global copra prices began rising in late 2013 and are expected to trend upwards in 2014, but PNG’s cocoa industry is struggling to deal with the impact of the devastating cocoa pod borer. Coffee bean production is also declining.

Although 80% of the population rely on agriculture for their income, crumbling roads and infrastructure means farmers struggle to get their products to market, prompting calls for the government to boost support.

Agriculture Minister Tommy Tomscoll has announced the Cocoa Board will receive K3.5 million to set up a subsidiary company by March and develop a business plan.He said the plan includes partnering with six  districts to plant 4.8 million cocoa trees by the end of the year. Cocoa futures are trading at about US$ 2,700 per tonne and are expected to rise further due to a global shortage of about 160,000 tonnes in the 2013/2014 season.

State-owned assets

This should be the year when we learn the government’s detailed plans for a Sovereign Wealth Fund and the reorganisation of state-owned assets.

The government plans a restructuring of its interests in oil, gas and mining resources into two separate mining and petroleum companies, Kumul Petroleum Holdings and Kumul Mining Holdings. All other state-owned enterprises are to be absorbed into a third company, Kumul Corporations Holdings.

Infrastructure

Substandard roads, power blackouts, irregular water supplies, flight delays and rudimentary health services continue to hamper the country’s development. But infrastructure can be the next key investment area, according to Kina Asset Management’s Syd Yates. There are already promising  developments in electricity, where independent power producers are augmenting PNG Power’s own power generation. Meanwhile, fast broadband internet is on its way, with the fibreoptic cables being laid to create PNG’s National Transmission Network.

To address the lag of investment in infrastructure , the government has gone into deficit and also intends to develop four economic hubs in the towns of Port Moresby (finance), Lae (manufacturing), Mount Hagen (agriculture) and Kokopo (tourism).

Business will also be hoping for greater competition in telecommunications, with a recapitalised Bemobile now up and running and prices set to drop.

We can expect more roadworks in 2014, with Department of Works Secretary David Wereh announcing his department will be focusing on regional roads development this year, saying K1.5 billion is needed each year for maintenance, but dealing with the backlog requires another K3 billion.

Port Moresby’s infrastructure will continue getting a refresh ahead of the 2015 Pacific Games, while Lae businesses will  be looking forward to end of 2014, when the much-needed Lae port expansion is predicted to be complete. They’ll also be looking for progress with the new highway to Nadzab Airport.

Manufacturing and fisheries

Retail and manufacturing reported a 20-30 per cent drop in revenues in 2013, as the kina weakened and commodity prices fell. Despite that, manufacturers are planning to expand, particularly in fisheries.

Employers are expecting to hear this year the results of the newly-appointed Minimum Wages Board, which is reviewing the last minimum wage determination of K2.29 (A$1.03) per hour, made in 2008.

Forestry

The Prime Minister has promised to set up a Task Force to deal with the Special Agricultural Business Leases (SABL) system, after a special commission found that only four of the 42 leases they examined had obtained landowner consent. The drive for sustainability continues to gain momentum, with the EU  now banning illegally-produced timber, which is thought to have constituted about one-third of exports.

What are you looking forward to in 2014?

Let us know in the comments box below.